Page 142 - CA Final PARAM Digital Book.

of accounting period would confirm that outstanding debtors on the date of the balance sheet date
have been realised.

➢ Definition: - Events between balance sheet date and date of audit report / Facts that
become known after balance sheet date
SA 560 on "Subsequent Events" establishes standards on the auditor's responsibility regarding
subsequent events. SA 560 on "Subsequent Events" states that the term "subsequent events" refers
to events occurring between the date of the financial statements and the date of the auditor’s
report, and facts that become known to the auditor after the date of the auditor’s report.

➢ Duty of Auditor: - Auditor should obtain S&A evidence that all events between date of
financial statements and date of audit report that require adjustment or disclosure have
been identified and recorded in CY / No need to check again is some areas are checked in
regular audit procedures / nature and extent depends on risk assessment
SA 560 lays down that the auditor should consider the effect of subsequent events on the financial
statements and on the auditor's report. When the time between the close of the year-end and the
adoption of accounts is about to take place, examination of subsequent events gains more
importance.
SA 560 further requires 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 adjustment of, or disclosure in, the financial
statements have been identified. The auditor is not, however, expected to perform additional audit
procedures on matters to which previously applied audit procedures have provided satisfactory
conclusions.

➢ Audit Procedures: - Understanding procedures, controls set by Mgt / Inquiry with Mgt,
TCWG / Reading minutes / Latest subsequent interim financial statements
The auditor shall perform the procedures required above so that they cover the period from the
date of the financial statements to the date of the auditor’s report, or as near as practicable
thereto. The auditor shall take into account the auditor’s risk assessment in determining the nature
and extent of such audit procedures, which shall include the following:
• Obtaining an understanding of any procedure’s, management has established to ensure
that subsequent events are identified.
• Inquiring of management and, where appropriate, those charged with governance as to
whether any subsequent events have occurred which might affect the financial statements.
• Reading minutes, if any, of the meetings, of the entity’s owners, management and those
charged with governance, that have been held after the date of the financial statements
and inquiring about matters discussed at any such meetings for which minutes are not yet
available.
• Reading the entity’s latest subsequent interim financial statements, if any.

➢ Adjusting Event: - If auditor identifies event requiring adjustment / see whether it is
adjusted or disclosed in FST / if not then modify the report
When, as a result of the procedures performed above, the auditor identifies events that require
adjustment of, or disclosure in, the financial statements, the auditor shall determine whether
each such event is appropriately reflected in those financial statements.

QNO Adjusting Event New Course – (SM23)
85.020 TITANIUM CNO--SA560.060
“Move Fast Limited” is engaged in the manufacturing of shoes and slippers located in Bahadurgarh in
Haryana. Due to unprecedented rains in the area in the month of September 2022, many areas of the
town got inundated due to the choking of sewer systems. As a result of the above, the company’s premises
located in town were also affected, resulting in damage of stocks.

The company has lodged a claim with the insurance company for ₹ 1 crore, and the same is shown as a
claim receivable as of 31st March 2023, as the claim was not settled at year end.

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