Page 119 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

06 COMPLETION AND REVIEW

Case Study – C.A. Sujatha M
Fire Incident: A devastating fire destroyed the company's plant, machinery, and inventories, resulting in a loss
of ` 50 crores.
Insurance Claim: The company filed a claim with insurers, but no progress was made by the end of the year.
Operational Halt: The company ceased operations post-fire and lacked funds for reinvestment.
Promoters' Effort: Company promoters attempted to sell personal properties, but the sluggish real estate
market hindered sales.
Customer Shift: Customers began sourcing products from other suppliers due to the company's inactivity.
Auditor's Dilemma: C.A. Sujatha M, the auditor, was uncertain about the company's future and its ability to
continue as a going concern.
Forensic Report: An initial forensic lab report questioned the authenticity of the fire claim.
Management's Rebuttal: The company's management found inconsistencies in the forensic report and
challenged its findings.
Evidence Presented: Management provided video graphics and digital evidence, which contradicted the
forensic lab's initial findings.
Revised Report: The forensic lab revised its report in favour of the company after reconsideration.
Claim Resolution: The positive revised report paved the way for the insurance claim's settlement.
Audit Insight: The auditor's focus on subsequent events helped identify factors affecting the company's ability
to continue operations.

SA 560

SUBSEQUENT EVENTS

(CNO--SA560.020) Requirement of AS 4
Subsequent Events Definition: - All significant events / favourable or unfavourable / occur between balance
sheet date and date of approval by BOD
Types of events: -
Non-adjusting Events:
• Events other than the adjusting events are non-adjusting events.
• Additional requirement as per IND AS- 10 is that material non- adjusting events should be disclosed in
notes to accounts.
Adjusting Events: Events which give more information regarding uncertainties (conditions) which are
existing as on balance sheet date
Exceptions:
• Events required to be adjusted by law or AS
• Events affecting going concern (GC)
• Events which are significant, material but not requiring adjustment can be disclosed in BOD report

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