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

While auditing Sahyadri Pharma Ltd for year-end 31 March, the auditor reviews April collections from debtors to gain evidence on the year-end receivable balances. The audit senior says this work already discharges the subsequent-events procedures, so nothing more is needed. What is the correct view under SA 560?

The view is incorrect. The subsequent-events procedures are required in addition to procedures done for other purposes, such as cut-off testing or subsequent receipts from debtors, even though those procedures may also provide evidence about subsequent events up to the auditor's report date.

  1. ACorrect, since cut-off and subsequent receipts testing replaces subsequent-events procedures
  2. BIncorrect, since subsequent-events procedures are required in addition to procedures performed for other purposes, even though those may also give evidence on subsequent eventsCorrect
  3. CCorrect, provided the receipts exceed materiality
  4. DIncorrect, since subsequent-events procedures apply only after the report date

Explanation

SA 560 states that the subsequent-events procedures are in addition to procedures done for other purposes, such as cut-off or subsequent receipts testing, though those may also give relevant evidence. They cover the period between the financial statement date and the report date. Option D is wrong because the required procedures relate to events up to the report date.

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