Auditor’s Responsibilities After the Audit Report Under SA 560

Introduction

For many practitioners, the signing of the auditor’s report marks the culmination of the audit engagement. Once sufficient appropriate audit evidence has been obtained, the financial statements have been approved by management, and the auditor’s opinion has been expressed, it is often assumed that the auditor’s responsibilities end. This perception, however, is only partially correct.

The period between the date of the auditor’s report and the issuance of the financial statements, or even after their issuance, may give rise to circumstances unknown during the audit that could materially affect the financial statements. These circumstances often place the auditor in a difficult position. Questions arise as to whether additional audit procedures are necessary, whether the audit report should be revised, or whether the auditor has any responsibility at all once the report has already been signed.

SA 560, Subsequent Events, addresses these situations precisely. The Standard recognises that the auditor’s responsibilities evolve depending upon the stage at which the subsequent fact comes to light. Accordingly, the auditor’s obligations before signing the audit report differ from those arising after the report has been signed but before the financial statements are issued, and differ further once the financial statements have already been issued.

Relevant Provisions of SA 560

SA 560 divides the auditor’s responsibilities into three distinct phases:

Events occurring between the date of the financial statements and the date of the auditor’s report

During this period, the auditor is required to perform audit procedures to identify events that require adjustment or disclosure in the financial statements. Since the audit opinion has not yet been expressed, the auditor remains responsible for obtaining sufficient appropriate audit evidence regarding subsequent events.

Facts becoming known after the date of the auditor’s report but before the financial statements are issued

Once the audit report has been signed, the auditor has no obligation to perform continuing audit procedures on the financial statements. However, if a material fact becomes known during this period which, had it been known earlier, might have caused the auditor to amend the audit report, SA 560 requires the auditor to discuss the matter with management and determine whether the financial statements require amendment.

Where management amends the financial statements, the auditor should perform the audit procedures necessary in the circumstances and issue a new auditor’s report in accordance with SA 560.

If management refuses to make the necessary amendments despite the financial statements being materially misstated, the auditor is required to take appropriate steps to prevent future reliance on the auditor’s report.

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