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

While auditing Rohini Pharma Ltd, the auditor completed cut-off testing and examined receipts from debtors after the balance sheet date, which provided evidence on year-end receivable balances. The engagement partner asks whether these procedures can be treated as satisfying the subsequent-events procedures required by SA 560 paragraphs 6 and 7. What is the correct position?

The required subsequent-event procedures are additional to procedures done for other purposes. Cut-off testing and subsequent receipts work may still give evidence about subsequent events, but they do not substitute for the procedures that paragraphs 6 and 7 require.

  1. AYes, they fully replace the procedures required by paragraphs 6 and 7
  2. BNo, such procedures are irrelevant to subsequent events
  3. CThe paragraph 6 and 7 procedures are in addition to procedures performed for other purposes, though those may also provide evidence about subsequent eventsCorrect
  4. DThey need be performed only if management asks for them

Explanation

SA 560 A6 states that the required subsequent-event procedures are in addition to procedures performed for other purposes, such as cut-off and subsequent receipts testing, which may nevertheless provide evidence about subsequent events. Hence they do not replace the required procedures, nor are they irrelevant.

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