Definition

Are events that occur after a company's year-end

period but before the release of the financial
statements.
In other words, subsequent events are events that
happen between the cut-off date and the date in
which the company issues its financial statements.
 Managements' responsibilities
Management are responsible for preparing the financial
statements in accordance with the relevant financial
reporting framework. IAS 10 Events After the Reporting
Period requires management to consider the impact of events
that occur after the year-end on the financial statements. It
categorises those events as either:
adjusting events, which provide evidence of conditions
that existed at the year-end, and therefore should be
considered in the transactions, balances and disclosures of
the financial statements, and
non-adjusting events, which concern conditions that
arose after the year-end and are therefore relevant to the
following period's financial statements. If serious though (i.e.
they could have a material impact on the business) these may
need to be disclosed in the financial statements.
 The auditors' responsibilities
ISA 560 Subsequent Events details the responsibilities of
the auditors with respect to subsequent events and the
procedures they can use. It identifies two periods of
relevance:
Up to the date of the audit report
Until this point the auditor must perform procedures to
identify events that need to be either adjusted or disclosed
in the financial statements.
 Between the date of the audit report and
publishing the accounts
During this period the auditor need not perform
procedures but, if they identify any adjustments or
disclosures that need to be made in the financial
statements they must take appropriate action.
This will normally be in the form of requesting that the
directors amend the financial statements and then
reissuing the audit report.
If the directors refuse then the auditor has the right to
communicate the known misstatements to the
shareholders at the annual general meeting. The auditor
may also consider resigning and issuing a statement of
circumstance.
 Procedures
The nature of procedures performed in a subsequent
events review depends on many variables, such as the
nature of transactions and events and the availability of
data and reports. However the following procedures are
typical of a subsequent events review:
Enquiring into management's procedures/systems for the
identification of subsequent events;
Inspection of minutes of members' and directors'
meetings;
Reviewing accounting records including budgets,
forecasts and interim information.
Enquiring of directors if they are aware of any subsequent
events that require reflection in the year-end account;
Obtaining, from management, a letter of
representation that all subsequent events have been
considered in the preparation of the financial
statements;
Inspection of correspondence with legal advisors;
Enquiring of the progress with regards to reported
provisions and contingencies; and
'Normal' post reporting period work performed in
order to verify year-end balances:
checking after date receipts from receivables;
inspecting the cash book for payments/receipts that
were not accrued for at the year-end; and
checking the sales price of inventories.
If, after the financial statements have been issued,
management amends the financial statements, the
auditor shall:
Provide a new auditor's report on the amended
financial statements; and
Extend the audit procedures described above to the
date of the new auditor's report.