Page 144 - CA Final PARAM Digital Book.

statements, as would be the case, for example, if such events call into question
the validity of the going concern assumption.
(E.g. Sale of Long-term Investments)

QNO Financial Statements Reopened by BOD Old Course – (N18E)
85.100 TITANIUM CNO--SA560.100 New Course – (SM23)

Amudhan & Co. are the Auditors of XYZ Company Ltd., for the year ended on 31/03/2018. The Audit Report
for that year was signed by the Auditors on 04/05/2018. The Annual General Meeting was decided to be
held during the month of August 2018. On 06/05/2018, the Company had received a communication from
the Central Government that an amount of Rs.5800 crores kept pending on account of incentives
pertaining to Financial Year 2017-18 had been approved and the amount would be paid to the Company
before the end of May 2018. To a query to Chief Financial officer of the Company by the Board, it was
informed that this amount had not been recognised in the Audited Financial Statements in view of the

same not being released before the close of the Financial Year and due to uncertainty of receipt. Now,
having received the amount, the Board of Directors wished to include this amount in the Financial
Statements of the Company for the Financial Year ended on 31/03/2018. On 08/05/2018, the Board
amended the accounts, approved the same and requested the Auditor to consider this event and issue a
fresh Audit Report on the Financial Statements for the year ended on 31/03/2018. Analyse the issues
involved and give your views as to whether or not the Auditors could accede to the request of the
Board of Directors.
Answer Part I -- Relevant Standards & Laws
▪ SA 560, Subsequent Events

Part II -- Requirements of Relevant Standards & Laws
➢ Facts Which Become Known to the Auditor After the Date of the Auditor’s Report but
Before the Date the Financial Statements are Issued:

SA 560
• No obligation to perform audit procedures after date of audit report
As per SA 560, “Subsequent Events”, the auditor has no obligation to perform any audit
procedures regarding the financial statements after the date of the auditor’s report.

• If information would have changed opinion, then audit procedures required
However, when, 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
• Discuss the matter with management and, where appropriate, those charged
with governance
• Determine whether the financial statements need amendment and, if so,
• Inquire how management intends to address the matter in the financial
statements.
• If management amends the financial statements, the auditor shall carry out the
audit procedures necessary in the circumstances on the amendment. Further, the
auditor shall extend the audit procedures and provide a new auditor’s report
on the amended financial statements. However, the new auditor’s report shall
not be dated earlier than the date of approval of the amended financial
statements.
Part III – Case Discussion
➢ In the instant case, XYZ Company Ltd. received an amount of rupees 5800 crore on account of
incentives pertaining to year 2017-18 in the month of May 2018 i.e. after finalization of financial
statements and signing of audit report. Board of Directors of XYZ Ltd. amended the accounts,
approved the same and requested the Amudhan & Co. (auditor) to consider this event and issue a
fresh audit report on the financial statements for the year ended on 31.03.2018.

Part IV -- Conclusion

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