Page 143 - CA Final PARAM Digital Book.

The insurance surveyor appointed in the case submitted a report to the insurance company
recommending a claim of ₹ 45 lacs in the month of April 2023. The company has also given its consent for
the same, and the settled amount of `45 lacs was transferred to the bank account of the company on 15th
May 2023.

You have just finished performing substantive procedures of the company by the end of May 2023. Is there
any responsibility cast upon you as auditor of the company in the above situation?
Answer The given situation provides evidence of conditions that existed at the date of financial statements. Initially,
the company had lodged claim of ₹ 1 crore and the same is reflected as claim receivable in financial
statements as on 31st March 2023.
However, subsequent events occurring have provided evidence that claim was settled for ₹ 45 lacs only.
Such settled amount has already been accepted by the company by providing its consent. Therefore, such
events have provided fresh information about items included in financial statements.

Further, performance of substantive procedures has been finished implying that audit report is not yet
issued.

Therefore, financial statements as on 31st March, 2023 should be adjusted to reflect fresh information
emanating from described events and management should be asked to take appropriate action in this regard
so that adjustment pertaining to above is properly reflected in financial statements in accordance with
applicable financial reporting framework.

Specific enquiry may be conducted to evaluate Old Course – (M19E,M22M)
QNO
85.050 subsequent events.
TITANIUM CNO--SA560.080
M/s LMP Associates, Chartered Accountants while conducting the audit of PQR Ltd want to conduct an
inquiry of management and those charged with governance as to whether any subsequent events have

occurred which might affect the financial statements. Guide M/s LMP Associates with the matters
where specific enquiry may be conducted to evaluate subsequent events.
Answer ➢ Specific Enquiries
• May make specific inquiries about the following matters

• (Assets - 3)
o Whether sales or acquisitions of assets have occurred or are planned.
o Whether any assets have been appropriated by government or destroyed, for
example, by fire or flood.
o Whether any events have occurred that is relevant to the recoverability of
assets.
(E.g. Product Banned Etc)

• (Capital & Liability -4)
o Whether there have been increases in capital or issuance of debt instruments,
such as the issue of new shares or debentures, or an agreement to merge or
liquidate has been made or is planned.
o Whether new commitments, borrowings or guarantees have been entered
into.
o Whether there have been any developments regarding contingencies.
o Whether any events have occurred that is relevant to the measurement of
estimates or provisions made in the financial statements.
(E.g. Draft royalty rates)
• (All items -2)
o Whether any unusual accounting adjustments have been made or are
contemplated.
(E.g. Heavy sales return)

o Whether any events have occurred or are likely to occur that will bring into
question the appropriateness of accounting policies used in the financial

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