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CA Final · Advanced Auditing, Assurance and Professional Ethics · Completion and Review

Nirmal Agro Ltd's auditor, CA Rohan, finished audit procedures on 10 June and plans to sign on 14 June. Before signing, he reviews procedures such as cut-off testing and subsequent receipts from debtors that were done to support year-end balances. Management says these are enough, so no further subsequent-events work is needed. What is the correct conclusion under SA 560?

The conclusion is incorrect. SA 560 treats the required subsequent-events procedures as additional to procedures done for other purposes, like cut-off or subsequent receipts testing. Those other procedures may give evidence about subsequent events, but they do not replace the specific procedures needed up to the report date.

  1. ACorrect, since cut-off and subsequent receipts testing fully replace subsequent-events procedures
  2. BIncorrect, because subsequent-events procedures are required only after the report is issued
  3. CIncorrect, because the subsequent-events procedures are in addition to such procedures, which may only provide incidental evidence about subsequent eventsCorrect
  4. DCorrect, provided the debtor balances are confirmed by management in writing

Explanation

SA 560 states that the procedures required for events between the financial statement date and report date are in addition to procedures performed for other purposes, such as cut-off or subsequent receipts, which may nevertheless give evidence on subsequent events. They do not replace the required procedures. Option A treats them as a substitute, which is wrong.

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