Annual Audit Manual
COPYRIGHT NOTICE — This document is intended for internal use. It cannot be distributed to or reproduced by third parties without prior written permission from the Copyright Coordinator for the Office of the Auditor General of Canada. This includes email, fax, mail and hand delivery, or use of any other method of distribution or reproduction. CPA Canada Handbook sections and excerpts are reproduced herein for your non-commercial use with the permission of The Chartered Professional Accountants of Canada (“CPA Canada”). These may not be modified, copied or distributed in any form as this would infringe CPA Canada’s copyright. Reproduced, with permission, from the CPA Canada Handbook, The Chartered Professional Accountants of Canada, Toronto, Canada.
2363 Subsequent events
Jun-2020
Overview
This section discusses:
- Subsequent events procedures to be performed at components
CAS Requirement
Where the group engagement team or component auditors perform audits on the financial information of components, the group engagement team or the component auditors shall perform procedures designed to identify events at those components that occur between the dates of the financial information of the components and the date of the auditor’s report on the group financial statements, and that may require adjustment to or disclosure in the group financial statements (CAS 600.38).
Where component auditors perform work other than audits of the financial information of components, the group engagement team shall request the component auditors to notify the group engagement team if they become aware of subsequent events that may require an adjustment to or disclosure in the group financial statements (CAS 600.39).
OAG Guidance
Components where an audit of financial information is performed
Subsequent events procedures are required at components where an audit of financial information is performed and are to cover both:
- The period from year-end to the date of the component auditor’s reporting to the group engagement team; and
- The period from the component auditor’s report to the group engagement team to the date of the group auditor’s report.
Where such components are audited by a component auditor, the subsequent events procedures may be performed by the group engagement team or the component auditor, although subsequent event procedures up to the date of the component auditor’s report will generally be performed by the component auditor before it reports to the group engagement team.
In determining the nature, timing and extent of subsequent events procedures to be performed at the component from the date of the component auditor’s report up to the date of the audit report on the group financial statements, and whether these will be performed by the group engagement team or the component auditor, the group engagement team needs to consider the risk that subsequent events at the component level will not be identified by group management or by the group engagement team. This includes understanding the controls and procedures component and group management have in place to identify subsequent events that affect the component.
The component auditor also needs to gain an understanding of these controls when performing subsequent events procedures at the component level.
Components where work other than an audit of financial information is performed
As addressed by CAS 600.38 and 39 above, subsequent events procedures are only required when an audit of the financial information of a component is performed. For all other types of work (an audit of one or more account balances, classes of transactions or disclosures; specified procedures; or a review of the financial information of the component) the requirement is only for the group engagement team to request that the component auditor notify them if they become aware of any subsequent events.
Component auditors need to consider events occurring between the date of the financial information and the date of the component auditor’s report, as applicable to the specific areas where their procedures are performed. However, the group engagement team also needs to request that the component auditor notify them if any subsequent events are identified in the period between the date of the financial information and the date of the group auditor’s report that may require adjustment or disclosure in the group financial statements.
While there is no requirement for specific subsequent events procedures to be performed in these circumstances, the group engagement team, using their knowledge of the group and their professional judgment, need to consider whether it is necessary to request component auditors performing work other than audits of the financial information of a component, to perform subsequent events procedures in addition to requesting notification of events that come to their attention.
Additional procedures are discussed in OAG Audit 9040.