Facts Discovered After the Date of the Auditor's Report (SA 560)

Understand Facts Discovered After the Date of the Auditor's Report

Key rules to remember

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.

How to solve Facts Discovered After the Date of the Auditor's Report questions

1. 1Fix the timeline from the case: report date, date the fact became known, and whether the financial statements have been issued. If they are already issued, this is a different situation, and the facts-after-issue provisions apply instead.
2. 2Test the fact: did it exist at the report date, and would it have changed the report had it been known? Say so in one line.
3. 3State the first action: discuss with management and, where appropriate, those charged with governance, and consider whether the financial statements need amendment.
4. 4If management amends: say that the auditor performs the necessary procedures on the amendment, extends the subsequent events review to the new report date, and issues a new or amended report.
5. 5Deal with the date: give the later date option and the dual dating option. Write the dual date wording using the case dates.
6. 6If management refuses or does not act: say the auditor modifies the opinion if the statements have not been issued. If the statements are issued despite this, the auditor takes action to prevent reliance on the report. Consider seeking legal advice.
7. 7Finish with the conclusion on the opinion type and the dates, tied to the figures in the case.

Quickest way: Timeline, Test, Talk, Treat, Date

Common mistakes in Facts Discovered After the Date of the Auditor's Report

• Saying the auditor must keep checking for new events between the report date and the issue date.

  Students mix this with the period up to the report date, where active procedures are required.

  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.

  Students focus on the outcome rather than the sequence of SA 560.

  Fix: Always write the discussion with management and those charged with governance first. The modification comes only if management does not act.

• Dating the new report earlier than the date of approval of the amended financial statements.

  Students keep the original date out of habit.

  Fix: A new report must be dated no earlier than the approval of the amended statements. To keep the original date for unchanged matters, use dual dating.

• Applying the later date to the whole report under dual dating.

  Students do not see that dual dating limits the later date to the amendment.

  Fix: Write the wording as 'original date, except for Note X, which is dated later date'. Explain that procedures on other matters stop at the original date.

• Confusing this topic with facts that become known after the financial statements are issued.

  Both sit under SA 560, and the titles look alike.

  Fix: Check the issue date in the case. If the statements are not yet issued, use the approach in this page. If they are issued, the post-issue provisions apply.

• Treating a new event after the report date as a fact that existed at the report date.

  Students read every post-report item as a correction trigger.

  Fix: Ask whether the condition existed at the report date. A fact that existed may require amendment. A purely new event is dealt with by disclosure considerations rather than a restatement.

Worked examples