Purpose of a Subsequent Events Review

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Auditors are responsible for their audit work from Y/E to issuing of FS

This duty is both Active and Passive

And ranges from

  • Active Duty

    Between the Y/E and signing the FS

    • To search for all material events

  • Passive Duty

    Between the signing and issue date

    • To act if they become aware of anything that may affect their audit opinion

Subsequent events are events which occur after the balance sheet date

The auditor must perform a subsequent events review

This involves:

  • Review post Y/E management accounts, budgets and cash flow forecast

  • Review of post Y/E board minutes

  • Review how management assess subsequent events and ask if any have been found

  • Obtain a management representation letter confirming this

  • Check post Y/E cash received to ensure: 

    1) Receivables are received and 
    2) NRV of inventory is as expected

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