Page 217 - CA Inter Audit PARAM

CA Ravi Taori
QNO— WR for Subsequent Event New Course – (SM25)
560.03.50 Bhaskar CNO - SA560.060
CA Chandni Khanna is going to complete audit of a company within next few days. She has performed
necessary audit procedures like inquiry of management personnel, reading minutes of meetings held
after date of financial statements, going through books of accounts after date of financial statements to
make sure that all subsequent events before signing audit report have been considered by her. Still, she
wants to be certain that no such events have been left out. What she should do in such a situation? Also,
discuss the rationale of doing so.
Answer She has already performed necessary audit procedures like inquiry of management personnel, reading
minutes of meetings after date of financial statements and going through books after date of financial
statements.

Now, she should request management and, where appropriate, those charged with governance, to provide
a written representation in accordance with SA 580, “Written Representations” that all events occurring
subsequent to the date of the financial statements and for which the applicable financial reporting
framework requires adjustment or disclosure have been adjusted or disclosed.

The rationale of obtaining written representations is that even after performing abovesaid procedures, she
may not come to know all subsequent events. Therefore, it is necessary from an auditor’s point of view to
obtain acknowledgment from management in the form of Written representations that all such events for
which the applicable financial reporting framework requires adjustment or disclosure have been adjusted
or disclosed.

Auditor’s Obligation - Facts which become known to the Old Course -- (M20R/SM20/SM21/N21M)
QNO auditor after the date of the auditor’s report but before
560.06 the date the financial statements are issued
Bhaskar CNO- SA560.080
"The auditor has no obligation to perform any audit procedures regarding the financial statements after
the date of the auditor’s report. 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.
Explain the auditor’s obligation in the above situation."
Answer ➢ The auditor has no obligation to perform any audit procedures regarding the financial statements
after the date of the auditor’s report. 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.

Case Study - Facts Known After Audit Report - Revision of FST Due to New Course – (S24E)
QNO--
Receipt of Incentive
560.15 Bhaskar CNO – SA560.080

"CA Rashmi is the auditor of ABC Ltd. for the financial year ending 31/03/2024. The audit report for the
year was signed by her on 19/04/2024.

On 25/4/2024, the company received a communication from the Central Government that an incentive
amount of ₹ 5 crores pertaining to financial year 2023-24 was approved. It was paid to the company before

the end of April 2024. The financial statements of the company were not yet issued to the shareholders.

The Board of Directors wished to include the incentive amount in the financial statements and requested
the auditor to issue a fresh audit report for the year ended 31/03/2024.

Analyze the issue involved and give an overview of the auditor's responsibility in such a situation."

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