ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review
Kestrel Foods has a 30 June 20X6 year end. The auditor's report was signed on 15 September 20X6. Before the financial statements were issued on 25 September 20X6, the auditor learned that a fire on 20 September destroyed a warehouse, an event arising after the period end that is non-adjusting but material. Management has not disclosed it. What is the most appropriate action under ISA 560?
The auditor should discuss the matter with management and ask them to amend the financial statements to disclose the fire. If management refuses to amend, the auditor must consider the effect on the report and take action to prevent reliance on it. Ignoring it because the report is dated is not acceptable.
- ADo nothing, because the report has already been dated
- BRequest management to amend the financial statements, and if they refuse, consider the effect on the report and take action to prevent reliance on itCorrect
- CIssue an emphasis of matter paragraph without involving management
- DWithdraw from the engagement immediately and notify the regulator
Explanation
Facts becoming known after the report date but before issue require the auditor to discuss with management, determine whether amendment is needed and, if so, ask management to amend. If management refuses, the auditor considers modifying the opinion or taking steps to prevent reliance on the report. Doing nothing ignores the duty.
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