Answer to Question #160567 in Economics for a

Question

The announcement made by Deloitte on July 26 2016 that the 1MDB’s financial statements for 2013 and 2014 should no longer be relied upon come under what is known in auditing as a subsequent event. There are three kinds of subsequent events. This is of which type? What may you say when comparison is made between what both Deloitte and the 1MDB had actually done for that type of subsequent event (as described in the case above) and what supposed to be done as detailed out in ISA 560 for subsequent events?

Answer 1

The auditor's goal is to:

Obtain sufficient appropriate audit evidence that events occurring between the reporting date and the date of the auditor's report that require adjustments or disclosures in the financial statements are properly reflected in these financial statements in accordance with the applicable financial reporting framework;

to take appropriate action in response to facts that the auditor became aware of after the date of the auditor's report and that would cause the auditor to change the auditor's report if they were known to the auditor at the date of the auditor's report.

In a number of jurisdictions, law or regulation has identified the person or body (for example, the management or those charged with governance) who is responsible for making the final decision on the availability of all statements included in the financial statements, including the associated notes, and the required approval procedure is provided. In other jurisdictions, the approval process is not established by law or regulation, and the organization follows its own procedures in preparing and finalizing the financial statements, taking into account the specific governance and management structure of the organization. In some jurisdictions, final approval of the financial statements by shareholders is required. In such jurisdictions, no final shareholder approval is required for the auditor to conclude that sufficient appropriate audit evidence has been obtained on which to base the auditor's opinion on the financial statements. For the purposes of the Australian Auditing Standards, the date on which financial statements were authorized for issue shall be the earlier of the following dates: the date on which those with the relevant authority determined that all statements included in the financial statements were prepared, including the related notes, or dates, to which those with the necessary authority have confirmed that they have assumed responsibility for these financial statements.