Subsequent Events

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Effect on the Dating Of the Opinion

Subsequent events have varied implications some of which do not affect the auditor’s dating of opinions while some have significant effects. Different types of subsequent events require further considerations and evaluations by the auditors. Some subsequent events provide further evidence relating to the prevailing facts at the balance sheet date and have got significant effect to the financial statements necessitate for alternate opinion. The dating of opinion by an auditor in such situations has to change since resultant information causes significant effects to the financial statement rendering the prior auditor’s opinion misleading to the management. Connectively, some subsequent events provide material information which was not available at the balance sheet date but surfaced shortly after that date. Whilst such events do not necessitate change in the financial statements, they may reveal facts which may affect decision making while relying on the financial statements. The dating of opinions by the auditor in such situations has to change to avoid misleading the users of the audited accounts with the previously held opinions. This is because the new information provides new insights to the financial statements (Bragg, 2012).

Specific Procedures

Specific procedures upon identification subsequent events by an auditor involve a series of events. For example where an auditor wishes to identify any particular subsequent events upon preparation of financial statements he follows various procedures. First, the auditor obtains the interim statements of finance and compares them with the final financial statements. This enables the auditor to identify significant material differences that may raise suspicion in preparation of those statements. The auditors are also required to inquire from relevant personnel involved in preparation of those financial statements and confirm whether the same approach was used in preparation of interim statements. The auditors then inquire whether there exist and significant contingent liabilities at the balance sheet date, whether there was deviation in capital stock, working capital or long term debt and whether the company has been involved in unusual transactions. Further, the auditors evaluate the minutes highlighted in various meetings in the company in order to identify key issues addressed and their effects on the financial statements. This enables the auditors to identify pertinent issues that may provide further information regarding the financial statements being reported (Flood, 2013).

Auditor’s Actions

Incase of subsequent events showing evidence of conditions that did not exist at the balance sheet date but arose later, an auditor should disclose such events as footnotes in the financial statements. This would be to avoid the prepared financial statements from misleading the users. Under certain circumstances, the auditors may be required to supplement the newly established information with pro forma financial information from historical statements of finance to give effect to the event like it occurred in the balance sheet date. The auditor is required to present such pro forma statements of finance in columnar format alongside the financial statement that is being reported upon. Connectively, in the case where subsequent events reveal additional information about pre-existing conditions on the balance sheet date and has substantial effects to the estimates therein, an auditor needs to include such changes to the financial statements. The auditor should have the new information incorporated in the balance sheet and give opinion relating to the new state of the financial statements. This is because such new evidence has brought about full disclosure of events that occurred before balance sheet date (Whittington & Delaney, 2010).




Bragg, S. (2012). Practitioner’s guide to GAAS 2012: covering all SASs, SSAEs, SSARSs, and interpretations. Hoboken: John Wiley & Sons.

Flood, J. (2013). Wiley practitioner’s guide to GAAS 2013 covering all SASs, SSAEs, SSARSs, and interpretations. Hoboken, N.J: Wiley.

Whittington, R. & Delaney, P. (2010). Wiley CPA exam review 2010-2011. Hoboken, N.J: Wiley.

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