REVIEW CHAPTER 5: AUDIT REVIEW (PSP_DAT5C_JUNE2020)
Group members:
VINOTH A/L KRSIHNAMOORTHY 10DAT18F1046
TAN YING HUA 10DAT18F1072
FATINLYANA YASMIN BT FADZLI YUSOF 10DAT18F1119
KHAIRUNNISA' BT ABDUL AZIZ 10DAT18F1050
SATHIYA RISHMA A/P JAGATHESAN 10DAT18F1091
TAN YING HUA 10DAT18F1072
FATINLYANA YASMIN BT FADZLI YUSOF 10DAT18F1119
KHAIRUNNISA' BT ABDUL AZIZ 10DAT18F1050
SATHIYA RISHMA A/P JAGATHESAN 10DAT18F1091
Introduction
A subsequent event are generally define as event that occurs after the year end period but before the financial statements have not been issued.
Got two types of subsequent events that is adjusting event and non adjusting events.
Adjusting events- provide evidence of condition that existed on the date of the financial statements.
Non adjusting events- provide evidence of condition that existed aroses that date of financial statement. Date of audit report is on the date when the auditor complete the report.
Refer to the slide we have prepared for more information.
For more information do watch this video:
Questions
Group 1: Define the subsequent event and after balance sheet event.
Group 2: List down the example of subsequent event and after balance sheet event.
Group 3: Discuss the effect of subsequent event on the Financial Statement.
Group 4: Identify the suitable procedures to handle subsequent event.
Group 6: Discuss the final step in completion of an audit.
Group 7: Explain the use of the attorney letter during the completion of an audit.
Group 8: Discuss the auditors' responsibilities upon completing the audit.
Comments
A subsequent event is an event that occurs after a reporting period, but before the financial statements for that period have been issued or are available to be issued. Depending on the situation, such events may or may not require disclosure in an organization's financial statements.
1) Date of approval of Financial Statements
2) Date of Auditor’s Report
3) Date of Financial Statement is issued
a) reading the minutes of meetings of the board of directors (BOD) , shareholders and other authoritative groups held after year end
b) Enquiring legal advisors about outstanding legal matters
c)reading the interim financial statement and investigating significant changes
d) Inquiring the management about
i. Singnificant changes noted in interim statemet
ii. Significant contigent liabilities
iii. Significant changes in working capital , debt or owner equity
iv. The status of any tentatives item
v. Unusual accounting adjustment made after the statement of financial position date
1. Completing the Audit Field Work
In particular, completing the fieldwork involves performing the following procedures to obtain additional audit evidence:
- Making a subsequent events review.
- Reading minutes of meetings.
-Obtaining evidence conceming lifigation, claims, and assessments.
- Obtaining a management representation letter.
- Performing analytic procedures.
2. Evaluating the Findings
- Making final assessment of materiality and audit risk. -Going concern.
-Review financial statements
- Formulating opinion(s) & audit report(s).
- Making final review of working papers
3. Communicating with the Client
The auditor's communicating with the client after the audit involves the following aspects:
-Communicating internal control structure matters.
- Communicating matters about the conduct of an audit.
- Preparing management letter.
The completion stage of the audit is of crucial importance. It is during the completion stage that the auditor reviews the evidence obtained during the audit together with the final version of the financial statements with the objective of forming the auditor's opinion.
Effect of subsequent event on financial statement
-Depending on the situation ,such events may or may not require disclosure in an organization's financial statements.
-Additional information. An event provides additional informational about conditions in existence as of the balance sheet date, including estimates used to prepare the financial statements for that period.
-New events. An event provides new information about conditions that did not exist as of the balance sheet date.
a(An attorney's letter is a formal business letter from a certified public accounting to a company's attorney.
b)Information sent to an accountant by a company's management related to pending litigation is verified through an attorney's letter.
c)The attorney's letter is used in the audit process with the goal of disclosing potential losses arising from lawsuits against the company that could negatively impact a company's financial position.