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Post-Balance Sheet Events in Auditing

This document discusses post-balance sheet events that may require adjustment to financial statements, such as a major subsidiary purchase or discontinuing an operation. It also covers the differences between management and auditor responsibilities for assessing going concern status, and options for auditors who disagree with management's assessment. Finally, it asks about the main purposes of obtaining a management representation letter.

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20 views1 page

Post-Balance Sheet Events in Auditing

This document discusses post-balance sheet events that may require adjustment to financial statements, such as a major subsidiary purchase or discontinuing an operation. It also covers the differences between management and auditor responsibilities for assessing going concern status, and options for auditors who disagree with management's assessment. Finally, it asks about the main purposes of obtaining a management representation letter.

Uploaded by

IT man
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

AUDB323 Audit and Investigation

Review Questions: Effect of Post-Balance Sheet Events

1. The following events occurred after the reporting date. For each event, state whether
it is an adjusting event or non-adjusting event:
a. Purchase of major subsidiary by the entity.
b. Discontinuing an operation.
c. A customer with long outstanding debt became bankrupt.
d. Issue of shares by the entity.
e. The commencement of a major legal case arising solely out of events that
occurred after the reporting date.
f. The settlement of a long outstanding lawsuit after the reporting date for an
amount different from the amount recorded in the year-end financial
statements.
g. Changes in tax laws that have significant effect on current and deferred tax.

2. ISA 570 Going Concern, differentiates between management’s and the auditor’s
responsibilities for the assessment of the going concern status of a company. Discuss.

3. The management of ABC Bhd believes that the company is able to continue as a going
concern. What options are available to the auditor if he/she disagrees with
management’s going concern assessment of that company?

4. What are the main purposes of obtaining a management representation letter?

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