Guide to Using International Standards on Auditing in - IFAC

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158 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Date of Financial Statement Approval This may be determined as shown in the exhibit below. Exhibit 13.1-2 Date of the Report The Recognized Authority Need for Shareholder Approval The earlier date on which those with the recognized authority: • Determine that all the statements that comprise the financial statements, including the related notes, have been prepared; and • Have asserted that they have taken responsibility for those financial statements. • Individuals prescribed by law or regulation who follow the necessary financial statement approval procedures; and • Individuals specified by the entity itself who follow their own financial statement approval procedures. Final approval by shareholders is not necessary for the audi<strong>to</strong>r <strong>to</strong> conclude that sufficient appropriate audit evidence on which <strong>to</strong> base the audi<strong>to</strong>r’s opinion on the financial statements has been obtained. In determining the existence of subsequent events and assessing their impact, the audi<strong>to</strong>r would carry out the steps set out below. Exhibit 13.1-3 Procedure Identify Any Subsequent Events Description Perform audit procedures <strong>to</strong> identify any subsequent events that would require adjustment of, or disclosure in, the financial statements. This would include: • Understanding management procedures (if any) <strong>to</strong> identify subsequent events; • Making inquiries of management (and those charged with governance) about: – New commitments, borrowings, or guarantees, – Sales or acquisitions of assets that have occurred or are planned, – Increases in capital or issuance of debt instruments, – Agreements <strong>to</strong> merge or liquidate, – Assets that have been appropriated by government or destroyed (e.g., by fire or flood), – Litigation, claims, and contingencies, – Any unusual accounting adjustments made or contemplated, – Any events that have occurred or are likely <strong>to</strong> occur that will bring in<strong>to</strong> question the appropriateness of the going-concern assumption or other accounting policies, – Any events relevant <strong>to</strong> the measurement of estimates or provisions in the financial statements, and – Any events relevant <strong>to</strong> the recoverability of assets; • Reading minutes, if any, of the meetings (management and those charged with governance) held after the date of the financial statements, and inquiring about matters discussed at meetings for which minutes are not yet available; and • Reading financial reports produced after the period end, if any.
159 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Procedure Obtain Written Representations Facts Become Known <strong>to</strong> the Audi<strong>to</strong>r (After Date of Audi<strong>to</strong>r’s Report but before Financial Statements Are Issued) Facts Become Known <strong>to</strong> the Audi<strong>to</strong>r (After the Financial Statements Are Issued) Description Consider whether written representations covering particular subsequent events may be necessary <strong>to</strong> support other audit evidence, and thereby obtain sufficient appropriate audit evidence. • Discuss the matter with management (and those charged with governance); • Determine whether the financial statements need amendment and, if so: – Inquire how management intends <strong>to</strong> address the matter in the financial statements, – Perform any further audit procedures required, and – Issue a new audi<strong>to</strong>r’s report on the amended financial statements. This could also include dual dating of the report, restricted <strong>to</strong> the amendment (see Volume 1, Chapter 13.2) or inclusion of an emphasis of matter paragraph; and • Where management does not amend the financial statements, the audi<strong>to</strong>r would issue a modified audi<strong>to</strong>r’s opinion. • If the audi<strong>to</strong>r’s report has already been released, notify management (and those charged with governance) not <strong>to</strong> issue the financial statements <strong>to</strong> third parties before the necessary amendments have been made. • If the financial statements are released despite the notification, take appropriate action (after consulting with legal counsel) <strong>to</strong> prevent reliance on the audi<strong>to</strong>r’s report. • Discuss the matter with management (and those charged with governance); • Determine whether the financial statements need amendment and, if so, inquire how management intends <strong>to</strong> address the matter in the financial statements; • If management amends the financial statements: – Extend the subsequent event audit procedures <strong>to</strong> the date of the new audi<strong>to</strong>r’s report unless the audi<strong>to</strong>r’s report is amended <strong>to</strong> include an additional date restricted <strong>to</strong> a particular amendment (see Volume 1, Chapter 13.2), – Perform any further audit procedures required, – Review management’s actions <strong>to</strong> ensure anyone in receipt of the previously issued financial statements and audi<strong>to</strong>r’s report thereon is informed of the situation, and – Provide a new audi<strong>to</strong>r’s report on the amended financial statements; • Issue a new or amended audi<strong>to</strong>r’s report that includes an “Emphasis of Matter” paragraph (see Volume 1, Chapter 13.2). If management does not take steps <strong>to</strong> ensure anyone in receipt of the previously issued financial statements is informed of the situation: – Notify management (and those charged with governance) that the audi<strong>to</strong>r will take appropriate action <strong>to</strong> seek <strong>to</strong> prevent reliance on the audi<strong>to</strong>r’s report; and • If, despite such notification, management (or those charged with governance) does not take the necessary steps, take appropriate action (such as consulting with legal counsel) <strong>to</strong> prevent reliance on the audi<strong>to</strong>r’s report.
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Guide to Using International Standards on Auditing in - IFAC

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