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

While auditing Bharat Steel Ltd, the auditor has finished testing year-end receivables cut-off and subsequent receipts from debtors. The auditor argues that no separate subsequent events procedures are needed for the period up to the report date. Which conclusion is correct as per SA 560?

The conclusion is incorrect. Subsequent events procedures required by SA 560 are in addition to procedures done for other purposes like cut-off and subsequent receipts, although those procedures may also provide evidence about subsequent events. The auditor cannot treat them as a complete substitute.

  1. ACorrect, since cut-off and subsequent receipts tests always cover all subsequent events
  2. BCorrect, but only for listed companies
  3. CIncorrect, the procedures required for subsequent events are in addition to procedures performed for other purposes, though those may also give evidence about subsequent eventsCorrect
  4. DIncorrect, since cut-off tests can never provide evidence on subsequent events

Explanation

SA 560 states that the required subsequent events procedures are in addition to procedures performed for other purposes, such as cut-off or subsequent receipts, which may nevertheless provide evidence about subsequent events. Option D overstates by saying they never help.

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