Annual Audit Manual
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9044 Events occurring after the financial statements have been issued
Apr-2018
In This Section
Financial statements are amended by management
Overview
This topic explains audit procedures in situations when:
- financial statements are amended by management,
- financial statements are not amended by management, and
- financial statements are included in other documents.
CAS Requirement
After the financial statements have been issued, the auditor has no obligation to perform any audit procedures regarding such financial statements. However, if, after the financial statements have been 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 560.14):
(a) Discuss the matter with management and, where appropriate, those charged with governance;
(b) Determine whether the financial statements need amendment; and, if so,
(c) Inquire how management intends to address the matter in the financial statements.
If management amends the financial statements, the auditor shall (CAS 560.15):
(a) Carry out the audit procedures necessary in the circumstances on the amendment.
(b) Review the steps taken by management to ensure that anyone in receipt of the previously issued financial statements together with the auditor’s report thereon is informed of the situation.
(c) 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 date the new auditor’s report no earlier than the date of approval of the amended financial statements; and
ii) Provide a new auditor’s report on the amended financial statements.
(d) When the circumstances in paragraph 12 apply, amend the auditor’s report, or provide a new auditor’s report as required by paragraph 12.
CAS Guidance
The auditor’s obligations regarding other information received after the date of the auditor's report are addressed in CAS 720. While the auditor has no obligation to perform any audit procedures regarding the financial statements after the financial statements have been issued, CAS 720 contains requirements and guidance with respect to other information obtained after the date of the auditor’s report (CAS 720.A18).
OAG Guidance
The necessary audit procedures depend upon the nature of the matter and the circumstances of its occurrence. Perform the 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, either in full or restricting them to the amendment of the financial statements.
Regarding the circumstances described in CAS 560.12, refer to “Restricting audit procedures to the amendment of the financial statements” in OAG Audit 9043.
For guidance on the issuance of a new auditor’s report and dual dating, refer to CAS 560 and consult with Audit Services concerning the proposed wording and/or dating of the auditor’s report.
The following table summarizes the different approaches to follow when events occur after the financial statements have been issued:
|
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. Include a reference in an emphasis of matter paragraph or other matter(s) paragraph discussing the reasons for amendment |
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 Further include a reference discussing the reasons for amendment |
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
The auditor shall include in the new or amended auditor’s report an Emphasis of Matter paragraph or Other Matter(s) paragraph referring to a note to the financial statements that more extensively discusses the reason for the amendment of the previously issued financial statements and to the earlier report provided by the auditor (CAS 560.16).
OAG Guidance
For guidance on amending audit report in such situations, refer to CAS 560 and CAS 706 as appropriate, and consult with Audit Services concerning the proposed wording of the auditor’s report.
CAS Requirement
If management does not take the necessary steps to ensure that anyone in receipt of the previously issued financial statements is informed of the situation and does not amend the financial statements in circumstances where the auditor believes they need to be amended, the auditor shall notify management and, unless all of those charged with governance are involved in managing the entity, those charged with governance, that the auditor will seek to prevent future reliance on the auditor’s report. If, despite such notification, management or those charged with governance do not take these necessary steps, the auditor shall take appropriate action to seek to prevent reliance on the auditor’s report (CAS 560.17).
CAS Guidance
Where the auditor believes that management, or those charged with governance, have failed to take the necessary steps to prevent reliance on the auditor’s report on financial statements previously issued by the entity despite the auditor’s prior notification that the auditor will take action to seek to prevent such reliance, the auditor’s course of action depends upon the auditor’s legal rights and obligations. Consequently, the auditor may consider it appropriate to seek legal advice (CAS 560.A20).
OAG Guidance
Unless the engagement leader recommends a different course of action, we take the following steps to the extent applicable:
- Notification to the entity that our report must no longer be associated with the financial statements.
- Notification to regulatory agencies having jurisdiction over the entity that our report must no longer be relied upon.
- Notification to each person known to us to be relying on the financial statements that our report must no longer be relied upon. In many instances, it will not be practicable for us to give appropriate individual notification to stockholders or investors at large, whose identities ordinarily are unknown to us; notification to a regulatory agency having jurisdiction over the entity will usually be the only practicable way for us to provide appropriate disclosure. Accompany such notification by a request that the agency take whatever steps it may deem appropriate to accomplish the necessary disclosure.
Under certain circumstances, a withdrawal from the engagement is appropriate. Consult in accordance with OAG Audit 3011.
CAS Guidance
When the audited financial statements are included in other documents subsequent to the issuance of the financial statements (other than annual reports that would be within the scope of CAS 720), the auditor may have additional responsibilities relating to subsequent events that the auditor may need to consider, such as legal or regulatory requirements involving the offering of securities to the public in jurisdictions in which the securities are being offered. For example, the auditor may be required to perform additional audit procedures to the date of the final offering document. These procedures may include those referred to in paragraphs 6 and 7 performed up to a date at or near the effective date of the final offering document, and reading the offering document to assess whether the other information in the offering document is consistent with the financial information with which the auditor is associated (CAS 560.A1).
OAG Guidance
The additional audit procedures would ordinarily include carrying out the procedures referred to in the “Audit procedures to identify all events between the date of financial statements and the date of the audit report” block of OAG Audit 9042 up to a date at or near the effective date of the final offer document and reading the offer document to assess whether the other information in the offer document is consistent with the financial information with which we are associated.