Completion and Review: formula sheet

Key formulas

Events between FS date and report date (timing kind 1)

Date of financial statements → Date of auditor's report

You must obtain sufficient appropriate audit evidence that events in this window needing adjustment or disclosure are properly reflected in the financial statements.

Facts after report date (timing kind 2)

Window A: after report date, before issue → discuss with management and determine whether the financial statements need amendment; if management amends, extend procedures to the date of the new report and give a new or amended report; if not, modify the opinion or take other action as appropriate. Window B: after issue → discuss with management, take action as appropriate

You have no duty to perform procedures after the report date. But if a fact comes to your knowledge that would have changed the report, you must respond. Before issue, you discuss the matter with management, determine whether the statements need amendment, and inquire how management intends to address it. If management amends the statements, you extend your procedures to the date of the new report and give a new or amended report. If management does not amend and you believe it should, you modify the opinion or take other action as appropriate. After issue, you discuss the matter with management and take action as appropriate.

Report date limit

Date of auditor's report ≥ Date on which sufficient appropriate audit evidence is obtained

The report must not be dated earlier than the date you obtain sufficient appropriate audit evidence. This includes evidence that the financial statements have been prepared and that those with recognised authority have asserted responsibility for them.

Adjusting event (Ind AS 10)

Evidence of condition existing at the balance sheet date → adjust amounts

Example: settlement of a court case after year end confirming a present obligation at year end.

Non-adjusting event (Ind AS 10)

Condition arising after the balance sheet date → disclose if material

Example: major acquisition or fire loss after year end. No change in recognised amounts.

Auditor's duty (SA 560)

Perform procedures to identify all events from the date of the financial statements up to the date of the auditor's report that need adjustment or disclosure

The duty runs only up to the date of the auditor's report. Procedures should take account of your risk assessment.

Typical procedures (SA 560 para 7)

Understand management's procedures + inquire of management and those charged with governance + read minutes of meetings of owners, management and those charged with governance held after the date of the financial statements + read the entity's latest subsequent interim financial statements, if any

These are the SA 560 procedures. Depending on circumstances, you may add others, such as reviewing budgets and cash flow forecasts, or inquiring of legal counsel (the legal counsel inquiry comes from SA 501, not SA 560).

Adjusting event

Evidence of conditions existing at the reporting date → adjust the amounts recognised

Examples: settlement of a court case confirming a present obligation, insolvency of a debtor confirming impairment, discovery of fraud or errors.

Non-adjusting event

Conditions arising after the reporting date → disclose nature and estimate of financial effect if material

Examples: fire after year end, major acquisition, fall in market value of investments after year end.

Report date limit

Date of auditor's report cannot be earlier than the date on which you obtained sufficient appropriate evidence, including evidence that those with recognised authority have asserted responsibility for the financial statements (approval)

Approval is part of the evidence, not a separate test. Do not date the report before you finish your subsequent events procedures.

Response to a material event

Properly treated → no effect on opinion; not properly treated → qualified or adverse opinion as per SA 705

Use qualified when the effect is material but not pervasive, adverse when material and pervasive.

Condition for the SA 560 procedure

Fact becomes known after report date + before FS are issued + existed at report date + might have changed the report

All four elements must be present. A fact that arose after the report date (a new event) is judged differently from a fact that already existed.

Auditor's first action

Discuss with management and, where appropriate, those charged with governance → decide if FS need amendment → ask how management will deal with it

Write the actions in this order in answers.

If FS are amended

Extend audit procedures to the new report date + issue new or amended report

The new report cannot be dated earlier than the date of approval of the amended FS.

Dating options

Option 1: new report with later date; Option 2: dual dating (original date, except for Note X dated later)

Under dual dating, the later date covers only the amended matter. Subsequent events procedures for other matters stop at the original date.

If management does not amend and FS not yet issued

Modify opinion (qualified or adverse as appropriate); if FS are issued despite this, take appropriate action to prevent reliance on the report

Modification depends on materiality and pervasiveness of the matter. Keep the two situations separate: modify before issue; prevent reliance only if the statements are issued anyway.

Responsibility in the gap

No duty to perform procedures or make enquiries on FS between report date and issue

The duty to act arises only when a fact comes to the auditor's knowledge.

Trigger condition

Fact becomes known after FS issued + fact existed at report date + might have led to amended report

All three conditions must hold. If the fact arose after the report date, this duty does not apply and you have no obligation to perform procedures after issue.

Duty to act

Discuss with management / TCWG → decide if FS need amendment → inquire how management will address it

Applies to facts known after issue. You do not need to search for such facts; there is no duty to perform procedures after issue.

If management amends

Procedures on the amendment + review management's steps to inform users + extend the procedures in paras 6-9 to the date of the new report + new report (new date) + EOM/OM paragraph

You extend the procedures in paras 6-9 of SA 560 to the date of the new report. The new report must not be dated earlier than the date the amended financial statements are approved.

If management does not amend

Notify management and TCWG → if no action, take appropriate steps to prevent reliance on the report

Seek legal advice on the steps you can take. Depending on that advice, these may include withdrawing from the engagement or resigning.

Duty after issue

No obligation to perform procedures on FS after issue

The duty arises only when you come to know of the fact.

Inconsistent representation

Representation conflicts with other evidence → investigate → if unresolved, reconsider reliability of all representations

Also consider whether the risk assessment is still appropriate and whether further procedures are needed.

Concerns about integrity

Doubt on integrity or diligence of management → representations may be unreliable → determine effect on opinion

If the concern is so serious that the representations on management's responsibilities are unreliable, disclaim an opinion (para 20(a)).

Representations not provided

Not provided → discuss with management and TCWG → reassess integrity → take appropriate action → reassess effect on opinion

Take the actions in this order. Do not jump straight to the disclaimer.

Mandatory disclaimer: para 20(a)

Integrity concerns so serious that responsibilities representations (paras 10 and 11) are unreliable → disclaim an opinion

The trigger is the auditor's conclusion on reliability of the responsibilities representations.

Mandatory disclaimer: para 20(b)

Management does not provide the responsibilities representations (paras 10 and 11) → disclaim an opinion

Applies after discussion and reassessment of integrity, even if the auditor has no integrity doubt.

Other representations missing or unreliable

Other representation not provided or unreliable → effect on opinion under SA 705 by materiality and pervasiveness

Outcome can be qualified, adverse or disclaimer. It is not automatically a disclaimer.

Date of representations

Date of written representations = as near as practicable to, but not after, the date of the auditor's report

They cover all financial statements and periods referred to in the auditor's report.

Form of representations

Written representations are in the form of a representation letter addressed to the auditor

Oral representations, or the signed financial statements alone, do not meet the requirement.

Status as evidence

Written representations are necessary audit evidence but do not provide sufficient appropriate evidence on their own

They do not affect the nature or extent of other evidence the auditor expects to obtain.

Quick revision

• SA 560 covers events between the period-end date and the date of the auditor's report, and facts found after that date.
• The auditor must perform procedures to obtain evidence that all subsequent events up to the report date requiring adjustment or disclosure are identified.
• After the report date, the auditor has no obligation to perform procedures on the financial statements.
• If a fact found after the report date but before issue would have affected the report, discuss with management and those charged with governance.
• If management amends the financial statements, extend subsequent-event procedures to the date of the new report. Then give a new report dated no earlier than the date of approval of the amended financial statements. Where the amendment is restricted to the specific subsequent event, you may instead give a dual-dated report, with an additional date restricted to that amendment. With dual dating, your extended procedures are restricted solely to that amendment.
• If management does not amend and the auditor believes it should, the answer depends on timing. If the report has not yet been provided to the entity, modify the opinion (qualified or adverse) and then provide the report. If the report has already been provided, tell management and those charged with governance not to issue the financial statements to third parties before the necessary amendments are made. If they are issued anyway, take appropriate action to prevent reliance on the report.
• After issue, if a fact would have caused the report to be amended had it been known, discuss the matter with management and those charged with governance. If the financial statements are amended, extend procedures to the new report date and give a new report on the amended financial statements. Management must also take steps to inform those who received the original financial statements.
• SA 580 requires written representations from management with appropriate responsibility, including on its responsibility for the financial statements and the completeness of information given.
• Representations should be dated as near as practicable to, but not after, the date of the auditor's report.
• Written representations do not replace other audit evidence on their own.
• If representations are inconsistent with other evidence, investigate and reconsider the reliability of management and of other representations.
• If management refuses a required representation, discuss the matter, reassess integrity and the reliability of other representations and audit evidence, and determine the possible effect on the opinion. If management does not provide the representations on its responsibilities (preparation of the financial statements and completeness of information), or integrity concerns make the representations unreliable, the auditor shall withdraw from the engagement where practicable and permitted by law. If withdrawal is not possible, the auditor disclaims an opinion.

Common mistakes

• Treating the date of the financial statements and the date of the auditor's report as the same date. Fix: Remember the gap: the first is the period end, the second is when you sign. Subsequent events sit between them.
• Saying the auditor must keep searching for events after signing the report. Fix: State that the auditor has no obligation to perform procedures after the report date, but must act on facts that come to knowledge.
• Treating every post year-end event as an adjusting event Fix: Always test whether the condition existed at the reporting date. A fire after year end is non-adjusting. A debtor's insolvency that confirms an old dues problem is adjusting.
• Saying the auditor's duty continues after signing the report Fix: State that the active search duty ends at the date of the auditor's report. Facts found afterwards fall under a different part of SA 560.
• Saying the auditor must keep checking for new events between the report date and the issue date. Fix: Write that after the report date the auditor has no obligation to perform procedures or enquiries on the financial statements. The duty arises only when a relevant fact becomes known.
• Jumping straight to modifying the opinion without speaking to management. Fix: Always write the discussion with management and those charged with governance first. The modification comes only if management does not act.
• Saying the auditor must keep checking for new facts after the FS are issued. Fix: State that there is no obligation to perform procedures after issue. The duty starts only when you come to know of a fact.
• Applying this rule to an event that occurred after the report date. Fix: Check that the fact existed at the report date. The post-issue duty applies only to such facts. For a later event, the auditor has no duty to perform procedures after issue.
• Treating the representation letter as sufficient audit evidence. Fix: Write that representations are necessary but not sufficient and cannot replace other evidence that could reasonably be expected.
• Disclaiming an opinion immediately when management refuses any representation. Fix: Show the sequence: discuss, reassess integrity, take appropriate action, then decide the effect. Disclaimer is required under para 20(b) if the responsibilities representations are still not provided, and under para 20(a) if integrity concerns make them unreliable. For other representations, apply SA 705 by materiality and pervasiveness.

Exam tips

• Always list the dates first. Examiners reward a clear timeline in case answers.
• In MCQs, test the condition: existed at year end means adjusting, arose later means non-adjusting.
• Write the answer in provision, facts and conclusion form, with the conclusion naming the effect on the audit report.
• Do not mix up SA 560 with Ind AS 10. SA 560 covers the auditor's duties and refers to the framework; Ind AS 10 covers the accounting treatment and the adjusting/non-adjusting split. Mention both in a combined question.
• Mention that no procedures are required after the report date, but action is needed on facts that come to knowledge.
• Draw a one-line timeline of the three dates before you write. Most case questions are solved by where the event sits on it.
• In theory answers, name the standard clearly: SA 560 for the auditor's duty and Ind AS 10 for the accounting treatment. Keep both in view.
• List at least four procedures. Examiners look for understanding management's process, inquiry of management and those charged with governance, reading minutes and reading the latest interim statements, if any. Add budgets, cash flow forecasts or legal counsel inquiry (SA 501) only as further procedures where the case suggests them.