Annual Audit Manual
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9043 Events occurring after the date of the audit report but before the date the financial statements are issued
Jun-2019
In This Section
Providing a new audit report on the amended financial statements
Restricting audit procedures to the amendment of the financial statements
Overview
This topic explains:
- Providing a new audit report on the amended financial statements.
- Restricting audit procedures to amendment of the financial statements.
- Action to take if financial statements are not amended.
CAS Requirement
The auditor has no obligation to perform any audit procedures regarding the financial statements after the date of the auditor’s report. However, if, after the date of the auditor’s report but before the date the financial statements are issued, a fact becomes known to the auditor that, had it been known to the auditor at the date of the auditor’s report, may have caused the auditor to amend the auditor’s report the auditor shall (CAS 560.10):
(a) Discuss the matter with management and, where appropriate, those charged with governance;
(b) Determine whether the financial statements need amendment;
(c) And, if so, inquire how management intends to address the matter in the financial statements.
CAS Guidance
While the auditor has no obligation to perform any audit procedures regarding the financial statements after the date of the auditor’s report but before the date the financial statements are issued, CAS 720 contains requirements and guidance with respect to other information obtained after the date of the auditor’s report, which might include other information obtained after the date of the auditor’s report, but before the date the financial statements are issued (CAS 560.A11).
As explained in CAS 210 the terms of the audit engagement include the agreement of management to inform the auditor of facts that may affect the financial statements, of which management may become aware during the period from the date of the auditor’s report to the date the financial statements are issued (CAS 560.A12).
OAG Guidance
Under CASs, we do not have any responsibility to perform audit procedures or make any inquiry regarding the financial statements after the date of the audit report. In circumstances where we issue consent to include our auditor report in certain documents, such as prospectuses or continuous disclosures, additional procedures to be performed include:
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Read the latest available interim financial statements.
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Inquire of and discuss with management the current status of items, in the financial statements being reported on, that were accounted for on the basis of tentative, preliminary, or inconclusive data, with particular focus on areas that are identified as being of higher risk or identified as having reasonable likelihood of subsequent developments occurring since the date of our report.
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Inquire of and discuss with management whether any changes have occurred that might affect the effectiveness of the entity’s internal control over financial reporting from the date specified on the assessment to the date of inquiry.
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Read the available minutes of meetings of stockholders, directors, and appropriate committees.
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Obtain the following reports to determine any impact on the effectiveness of the entity’s internal control over financial reporting:
- Internal audit reports (or similar functions, such as loan review in a financial institution).
- Independent auditor reports (if other than ours) of significant deficiencies.
- Regulatory agency reports on the entity’s internal control over financial reporting.
- Information about the effectiveness of the entity’s internal control over financial reporting obtained through other engagements.
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Obtain updated legal letters from entity’s legal counsel concerning litigation, claims and assessments in areas that are identified as having reasonable likelihood of subsequent developments occurring since the date of our report.
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Obtain an updated representation letter.
Where applicable, refer to Specialized Areas of the CPA Canada Assurance Handbook, 7150 Auditor’s Consent to the Use of a Report of the Auditor Included in an Offering Document and 7170 Auditor’s Consent to the Use of the Auditor’s Report in Connection with a Designated Document.
CAS Requirement
If management amends the financial statements, the auditor shall (CAS 560.11):
(a) Carry out the audit procedures necessary in the circumstances on the amendment
(b) Unless the circumstances in paragraph 12 apply:
i) Extend the audit procedures referred to in paragraphs 6 and 7 to the date of the new auditor’s report and
ii) Provide a new auditor’s report on the amended financial statements. The new auditor’s report shall not be dated earlier than the date of approval of the amended financial statements
OAG Guidance
The necessary audit procedures depend upon the nature of the matter and the circumstances of its occurrence. Perform audit procedures referred to in “Audit procedures to identify all events between the date of financial statements and the date of the audit report” of OAG Audit 9042.
For guidance on the issuance of a new audit report, refer to CAS 560 for reporting requirements specific to the circumstances of the engagement and consult with Audit Services concerning proposed wording of the auditor’s report.
The following table summarizes the different approaches to follow when events occur after the date of the audit report, but before the date the financial statements are issued:
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Management amends the financial statements |
Management does not amend the financial statements |
|
|---|---|---|
|
Amendment of complete financial statements |
Amendment restricted to effects of subsequent events |
|
|
Extend the audit procedures referred to in CAS 560.6 and 7 to the date of the new auditor’s report Provide a new auditor’s report on the amended financial statements. |
Restrict the audit procedures on subsequent events required in CAS 560.6 and 7 to that amendment Amend the audit report to include an additional date Or Provide a new or amended auditor’s report that includes a statement in an emphasis of matter paragraph or other matter(s) paragraph communicating the restriction |
Audit report not issued: Modify the opinion as required by CAS 705 and then provide the auditor’s report Audit report issued: Actions required to prevent reliance on the audit report (e.g., notification of those charged with governance) Consult in accordance with OAG Audit 3081 and document the outcome of the consultation Withdrawal from engagement under certain circumstances |
CAS Requirement
Where law, regulation or the financial reporting framework does not prohibit management from restricting the amendment of the financial statements to the effects of the subsequent event or events causing that amendment and those responsible for approving the financial statements are not prohibited from restricting their approval to that amendment, the auditor is permitted to restrict the audit procedures on subsequent events required in paragraph 11(b)(i) to that amendment. In such cases, the auditor shall either (CAS 560.12):
(a) Amend the auditor’s report to include an additional date restricted to that amendment that thereby indicates that the auditor’s procedures on subsequent events are restricted solely to the amendment of the financial statements described in the relevant note to the financial statements, or
(b) Provide a new or amended auditor’s report that includes a statement in an Emphasis of Matter paragraph or Other Matter(s) paragraph that conveys that the auditor’s procedures on subsequent events are restricted solely to the amendment of the financial statements as described in the relevant note to the financial statements.
CAS Guidance
When, in the circumstances described in paragraph 12(a), the auditor amends the auditor’s report to include an additional date restricted to that amendment, the date of the auditor’s report on the financial statements prior to their subsequent amendment by management remains unchanged because this date informs the reader as to when the audit work on those financial statements was completed. However, an additional date is included in the auditor’s report to inform users that the auditor’s procedures subsequent to that date were restricted to the subsequent amendment of the financial statements. The following is an illustration of such an additional date (CAS 560.A13):
“(Date of auditor’s report), except as to Note Y, which is as of (date of completion of audit procedures restricted to amendment described in Note Y).”
OAG Guidance
Perform audit procedures referred to in “Audit procedures to identify all events between the date of financial statements and the date of the audit report” of OAG Audit 9042, restricted to the amendment of the financial statements
For guidance on the issuance of a new audit report and dual dating, refer to CAS 560 and consult with Audit Services concerning the proposed wording of the auditor’s report.
CAS Requirement
In some jurisdictions, management may not be required by law, regulation or the financial reporting framework to issue amended financial statements and, accordingly, the auditor need not provide an amended or new auditor’s report. However, if management does not amend the financial statements in circumstances where the auditor believes they need to be amended, then (CAS 560.13):
(a) If the auditor’s report has not yet been provided to the entity, the auditor shall modify the opinion as required by CAS 705 and then provide the auditor’s report
(b) If the auditor’s report has already been provided to the entity, the auditor shall notify management and, unless all of those charged with governance are involved in managing the entity, those charged with governance, not to issue the financial statements to third parties before the necessary amendments have been made. If the financial statements are nevertheless subsequently issued without the necessary amendments, the auditor shall take appropriate action, to seek to prevent reliance on the auditor’s report
CAS Guidance
No amendment of financial statements by management
In some jurisdictions, management may not be required by law, regulation or the financial reporting framework to issue amended financial statements. This is often the case when issuance of the financial statements for the following period is imminent, provided appropriate disclosures are made in such statements (CAS 560.A14).
Auditor action to seek to prevent reliance on auditor’s report
The auditor may need to fulfill additional legal obligations even when the auditor has notified management not to issue the financial statements and management has agreed to this request (CAS 560.A16).
Where management has issued the financial statements despite the auditor’s notification not to issue the financial statements to third parties, the auditor’s course of action to prevent reliance on the auditor’s report on the financial statements depends upon the auditor’s legal rights and obligations. Consequently, the auditor may consider it appropriate to seek legal advice (CAS 560.A17).
OAG Guidance
Our actions will depend on our legal rights and obligations; accordingly, consider consulting with Audit Services and Legal Services.