ACCA Strategic Professional · Advanced Audit and Assurance (International) · Subsequent events and going concern
Kalmar Co's auditor signed the audit report on 10 March. On 20 March, before the financial statements were issued, the auditor learned that a major customer that owed 15% of receivables went into liquidation on 5 March, due to conditions existing at the year-end. Management has not adjusted the financial statements. What should the auditor do first under ISA 560?
The auditor should discuss the matter with management and those charged with governance and determine whether the financial statements need amendment. If they are amended, the auditor extends procedures and issues a new dated report; if not, a modified opinion is considered. Ignoring the matter because the report is dated is wrong.
- ADo nothing because the report has already been dated
- BDiscuss the matter with management and those charged with governance, and determine whether the financial statements need amendmentCorrect
- CWithdraw from the engagement immediately and notify the regulator
- DInclude an other matter paragraph in the report and issue the financial statements unchanged
Explanation
Facts discovered after the report date but before issue require the auditor to discuss with management and determine whether amendment is needed. If management amends, the auditor performs necessary procedures and issues a new report dated later. If management refuses, the auditor considers a modified opinion. The auditor does not ignore the matter, and an other matter paragraph is not the remedy for a misstatement.
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