AUDIT REVIEW

Group 5

1. NUR AZIKA SYAMIMI BINTI MOHD  NOOR 10DAT18F2019

2. NURFITRAH BINTI FAUZEE 10DAT18F2023

3. NUR IYLIA SYAFIQAH BINTI MOHD YUSOF 10DAT18F2031                                       

4.MUHAMMAD ZUHAIRI BIN MOHD MARYADI 10DAT18F2041

5. IVONA NATHAN A/P S. SOOSAI NATHAN 10DAT18F2064

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AUDIT REVIEW

Introduction📌

(a) Reviewing subsequent events that occur after the date of the Statement of Financial Position (balance sheet) 

(b) Reviewing the client's loss contingencies; going concern 

(c) Conducting a final analytical review of the financial statements, and 

(d) Completing an engagement quality review (also referred to as a concurring partner review)

SUBSEQUENT EVENTS

Subsequent events require special audit attention and involve the following activities:

 (a) A review of events occurring after the client's Statement of Financial Position date, but prior to issuance of the audit report 

(b) The subsequent discovery of facts existing at the date of the auditor's report, but not discovered during the audit, and

 (c) The consideration of omitted audit procedures that came to attention after the auditor's report has been issued.

TYPE OF SUBSEQUENT EVENTS

Types Two types of events are identified by ISA 560: Subsequent Events, as follows-

 (a) Type 1 subsequent events (or adjusting events): Those that provide evidence of conditions that existed at the date of the financial statements, and 

(b) Type 2 subsequent events (or non-adjusting events): Those that provide evidence of conditions that arose after the date of the financial statements 

Auditors need to consider the effect of these subsequent events on the financial statements and also on the auditor's report. Table  elaborates further on the types of subsequent events mentioned.

Adjusting events

(a) A major customer files for bankruptcy during the subsequent oot period; the customer's deteriorating financial condition existed prior to the Statement of Financial Position date.

 (b) A lawsuit settled for a different amount than accrual.

 (c) Stock dividend or split during the subsequent period.

 (d) A sale of inventory that is below carrying value which provides evidence that the nett realizable value was less than the cost at year-end

Non-adjusting events

(a) Uninsured casualty loss that occurred after the Statement of Financial Position date. 

 (b) A significant lawsuit initiated for incidents occurring after the Statement of Financial Position date. 

 (c) A significant loss due to natural disaster occurring after the Statement of Financial Position date.

 (d) Major decisions made during the subsequent period, e.g. to merge, discontinue a line of business or issue new securities. 

 (e) A material change occurring in the value of investment securities.

AUDIT PROCEDURES ON SUBSEQUENT EVENTS

 ISA 560 Subsequent Events states that the auditor shall perform audit procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of the financial statements and the date of the auditor's report that require adjustments of, or disclosure in, the linancial statements have been identified. 

 The auditoris, however, notexpected to perform additional audit procedures on matters to which previously applied audit procedures have provided satisfactory conclusions. The audit procedures that can be used by auditors to identify these subsequent events include, among others: 

(a) Reading the minutes of meetings of the boand of directors (BOD '), stockholders and other authoritative groups held after year end

 (b) Inquiring legal advisors about outstanding legal matters 

(c) Reading the interim financial statements and investigating significant changes

 (d) Inquiring the management about:

 • Significant changes noted in interim statements 

•Significant contingent liabilities 

•Significant changes in working capital, debt or owners' equity 

• The status of any tentative items, and 

• Unusual accounting adjustments made after the Statement of Financial Position date.

LETTER OF AUDIT ENQUIRY

A primary source of corroborative evidence concerning litigation, claims and assessments is the client's legal counsel. A letter of audit inquiry should include: 

a) Identification of the company, its subsidiaries and the date of the audit

 (b) A list of contingencies described and evaluated by the management 

(c) Arequest that the attorney furnishes the auditor with the following: 

 (i) A comment on the completeness of the management's list and evaluations 

(ii) For each contingency: 

A description of the matter, progress to date and action client intends to take 

• An evaluation of the likelihood of unfavorable outcome and an estimate of potential loss, if possible 

• Any limitations on the attorney's response

Link supported

📌https://sway.office.com/S2oPrmcNSloQcu0B?ref=Link

📌https://mypolyaudit.blogspot.com/2021/05/audit-review.html

📌https://padlet.com/mypolyaudit/dpa5043dec2020

📌https://www.facebook.com/894503637335357/posts/4003303286455361/

QUESTION EACH GROUP

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1. Define subsequent events according to MFRS 110

2. State two types of subsequent events

3. Define the meaning of subsequent event

4. Explain 5 audit procedures on subsequent events

6.Example letter of audit enquiry

7.Explain 6 non adjusting events

8.Explain going concern meaning