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TS3: Auditing subsequent events
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TS3: Auditing subsequent events 
 
What do mandatory Australian Auditing Standards require? 
 
Mandatory ASA*560 Subsequent Events requires the auditor to perform procedures to obtain sufficient appropriate audit evidence that all events up to the date of the audit report that may require adjustment or disclosure in the financial report have been identified. 
 
Why is documenting your review of subsequent events important? 
 
Under ASA 560, your responsibility to ensure the financial report is fairly stated extends to the date the audit report is signed. The subsequent events review thus forms part of the completion stage of the audit and helps ensure you have sufficient appropriate evidence on which to base your audit opinion, reducing the risk of issuing an incorrect audit report. 
 
In addition, documenting your subsequent events review provides evidence that you carried out the audit in accordance with ASAs. 
 
What should your review of subsequent events include? 
 
ASA 560 suggests that a subsequent events review usually includes procedures such as: 

  • reviewing the procedures management has established to identify subsequent events 
  • reading minutes of meetings held after period end 
  • enquiring of management as to whether any subsequent events have taken place which may affect the financial report
ASA 560.10 contains further details on the procedures generally included in a subsequent events review. (In addition to these, you may find it useful to check payments and receipts made post-balance date to ensure the entity has recorded all transactions relating to the financial period under audit.) 
 
The level of documentation required for your subsequent events review will vary from client to client. For example, for a self managed superannuation fund you may find that a short narrative is sufficient to record the results of the procedures performed. 
 
What action do you need to take? 
 
Prior to signing all your audit reports, ensure that you have carried out and documented your subsequent events review. 
 
For further guidance, refer to ASA 560. This standard is currently available at www.auasb.gov.au and will be available in your Members’ Handbook at following the December 2006 update. 
 
* Mandatory Auditing Standards (ASAs) apply to audits of financial reports and other financial information for financial reporting periods commencing on or after 1 July 2006. The superseded AUS standard contained similar requirements.