HKSA 560 - Subsequent Events (Condensed)

Introduction & Scope (Paras 1-3)

Introduction & Scope

Scope of HKSA 560

Deals with auditor’s responsibilities for subsequent events in an audit of financial statements. Does not cover other information after the auditor’s report date (addressed in HKSA 720). However, such other information may reveal a subsequent event within this HKSA’s scope.

Two Types of Subsequent Events

Objectives (Para 4)

Objectives

Auditor’s Two Main Objectives

1. Obtain sufficient appropriate audit evidence about events between the date of the financial statements and the date of the auditor’s report that require adjustment or disclosure, ensuring they are appropriately reflected in accordance with the applicable financial reporting framework.
2. Respond appropriately to facts that become known after the auditor’s report date that, had they been known at that date, may have caused the auditor to amend the report.

Definitions (Para 5 & A2-A5)

Definitions

Key Terms

Requirements – Period 1: Before Auditor’s Report (Paras 6-9)

Requirements – Events Between FS Date and Auditor’s Report Date

Mandatory Audit Procedures (Para 7)

The auditor shall perform procedures covering the period from the date of the financial statements to the date of the auditor’s report, including:

• Understand management’s procedures to identify subsequent events.
• Inquire of management and those charged with governance about subsequent events.
• Read minutes of meetings of owners, management, and governance held after the FS date; inquire about matters discussed in meetings without minutes.
• Read the entity’s latest subsequent interim financial statements.

Evaluation and Written Representations

If events requiring adjustment/disclosure are identified, determine they are appropriately reflected. Request written representations from management (per HKSA 580) that all required adjustments/disclosures have been made.

Requirements – Period 2: After Report, Before Issuance (Paras 10-13)

Requirements – Facts Known After Report Date But Before Issuance

No Obligation to Search, But Must Act

The auditor has no obligation to perform audit procedures after the report date. However, if a fact becomes known that may have caused amendment, the auditor shall:

1. Discuss the matter with management and those charged with governance.
2. Determine whether the financial statements need amendment.
3. Inquire how management intends to address the matter.

If Management Amends the Financial Statements

• Carry out necessary audit procedures on the amendment.
• Extend procedures to the date of the new auditor’s report.
• Provide a new auditor’s report dated no earlier than the date of approval of the amended financial statements.

Dual Dating (Para 12)

If the amendment is restricted to the effects of the subsequent event, the auditor may use dual dating (e.g., “(Date of auditor’s report), except as to Note Y, which is as of (date of completion of audit procedures restricted to amendment)”).

If Management Does NOT Amend

• If report not yet provided: modify the opinion per HKSA 705.
• If report already provided: notify management not to issue the financial statements; if issued, take action to prevent reliance.

Requirements – Period 3: After Issuance (Paras 14-17)

Requirements – Facts Known After Financial Statements Are Issued

No Obligation to Search, But Must Act

After issuance, the auditor has no obligation to perform procedures. If a fact becomes known that may have caused amendment, the auditor shall:

1. Discuss with management and those charged with governance.
2. Determine whether the financial statements need amendment.
3. Inquire how management intends to address the matter.

If Management Amends the Financial Statements

• Carry out necessary audit procedures on the amendment.
• Review management’s steps to inform recipients of the previously issued financial statements.
• Provide a new auditor’s report with an Emphasis of Matter or Other Matter paragraph explaining the reason for amendment and referencing the earlier report.

If Management Does NOT Take Necessary Steps

Notify management and those charged with governance that the auditor will seek to prevent future reliance on the auditor’s report. If steps are still not taken, take appropriate action (may include seeking legal advice).

Conformity & Summary (Para 18 & Key Takeaways)

Conformity with International Standards

HKSA 560 conforms with ISA 560. Compliance ensures international consistency.

Key Timelines and Auditor Responsibilities