SUBSEQUENT EVENTS – ISA 560 (REDRAFTED)
DEFINITION
Subsequent events are events occurring between the period end and the date of the
auditor’s report, and facts discovered after the date of the auditor’s report.
SUBSEQUENT EVENTS INCLUDE:
1) Events occurring between the period end and the date of the auditor’s report
2) Facts discovered after the date of the auditor’s report
IAS 10- EVENTS AFTER THE REPORTING PERIOD
This deals with the treatment in the financial statements of events favourable and
unfavourable, occurring after the period end. It identifies two types of events:

ADJUSTING EVENTS – those that provide further or additional evidence of
conditions that existed at the end of the reporting period; they require adjustments
in the financial statements.
EXAMPLES OF ADJUSTING EVENTS:
o Allowances for inventory and doubtful debts
o Amounts received or receivable in respect of insurance claims which
were being negotiated at the reporting date.
o The determination of the purchase or sale price of non-current assets
purchased or sold before the year-end.

NON ADJUSTING EVENTS – those that are indicative of conditions that arose after
the reporting period, but which may be of such materiality that their disclosure is
required to ensure that the financial statements are not misleading.
EXAMPLES OF NON-ADJUSTING EVENTS:
o The issue of new share or loan capital
o Major changes in the composition of the group e.g. mergers,
acquisitions or reconstructions
o Financial consequences of losses of non-current assets or inventory as a
result of fires or floods or bombs or any natural catastrophe e.g. volcano
eruption.
However it should be noted that the post reporting period covered by IAS 10 only stretches
between the reporting date and the date when the accounts are authorised for issue, i.e. it
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is shorter than the subsequent events period of ISA 560.
EVENTS OCCURRING UP TO THE DATE OF THE AUDITOR’S REPORT
The auditor shall perform procedures designed to obtain sufficient appropriate audit
evidence that all events occurring between the date of the financial statements and the
date of the auditor’s report that require adjustment of or disclosure in the financial
statements have been identified.
These procedures should be applied to any matters examined during the audit which may
be susceptible to change after the year-end.
ISA 560 lists procedures to identify subsequent events which may require adjustment or
disclosure. They should be performed as near as possible to the date of the auditor’s
report.
PROCEDURES TESTING SUBSEQUENT EVENTS
Enquiries Made on
Management on:
 Status of items involving subjective judgement/accounted for
using primary data.
 New commitments, borrowings or guarantees.
 Sales or destruction of assets.
 Issues of shares/debentures or changes in business structure.
 Developments involving risk areas, provisions and
contingencies.
 Unusual accounting adjustments.
 Major events (such as going-concern status) affecting
appropriateness of accounting policies for estimates.
Other Procedures:
 Consider procedures of management for identifying
subsequent events.
 Read minutes of general board/committee meetings.
 Review latest accounting records and financial information.
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When the auditor identifies events that require adjustment or disclosure in the financial
statements, the auditor shall determine whether such events are properly reflected in the
financial statements.
Written representations will be sought that all events occurring subsequent to the date of
the financial statements, which require adjustment or disclosure have been adjusted or
disclosed.
FACTS DISCOVERED AFTER THE FINANCIAL STATEMENTS HAVE BEEN ISSUED
Auditors have no obligation to perform procedures or make enquiries regarding the
financial statements after they have been issued.
However, when after the financial statements had been issued, the auditor becomes aware
of the fact 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 will carry out the
following procedures:
(a) Discuss the matter with management and where appropriate, those charged with
governance.
(b) Determine whether the financial statements need amendment, and if so
(c) Inquire how management intends to address the matter in the financial statements.
When the financial statements are amended, the auditors should extend the procedures
discussed above to the date of their new report, carry out any other appropriate
procedures and issue a new audit report.
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