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Audit: Subsequent Events Procedures

The period between the balance sheet date and the date of the auditor report is called the subsequent period. Audit procedures performed in this period are called the subsequent events review.

The significance of the audit report date is that it is the cutoff point for an auditor's responsibility to be informed about events and transactions that occur after the date of the financial statements but that have a material effect on those statements.

What are the two types of subsequent events in terms of their effects on the financial statements? Give an example of each type of subsequent events?

List the type of procedures performed during a subsequent events review.

Solution Preview

Type I events are those which cause an adjustment to be made to the financial statements under audit. The review might disclose additional information about an estimate made at year end. Given additional information, the estimate should be changed. For example, the settlement of an estimated liability after the date of the ...

Solution Summary

The solution explains the two types of subsequent events which could become evident during the subsequent review procedures including an example of each. The seven basic procedures that are performed prior to the report date are listed. They comprise a basic audit program for the subsequent event period.