Question

Answer the three questions below. For questions (i) and (ii) key dates are as follows: Balance date is June 30th. The Audit Report was signed on September 30th. The Financial Statements were issued to shareholders on November 4th.

(i) State three audit procedures required under ASA 560 if the auditor discovers that a material event took place on July 23rd.

(ii) Is the auditor required to undertake any audit procedures if he/ she was informed by management on October 9th that management intended to amend the financial report because of the bankruptcy of a major debtor on October 4th?

(iii) True or False. If an auditor provides a new audit report in relation to a subsequent event, it cannot be dated earlier than the date on which the directors approved the emended financial report.

Answer 1

Answer(i)

Three Audit Procedures required under ASA560 if the auditor discovers that material event took place on Jululy23rd are

1)Inquiring of management and those charged with governance as to whether any subsequent events occurred which might affect the financial statements.

2)Reading entity latest subsequent interim financial statements ,if any.

3)Obtaining an understanding of any procedures managemnet has established to ensure that subsequent events are identified.

Answer (ii)

The auditor has no obligation to perform any audit procedures regarding the financial statements after date of auditor report.As bankruptcy occur on Oct4 while auditor report was signed on Sept30 .Hence bankruptcy was not known to auditor on sept30.

Answer(iii)

True

According to ASA560 The new auditor report shall not be dated earlier that the date of approval of the amended financial statements.