You are required to identify the audit procedures which would need to be carried out in order to identify material post balance sheet events
Post Balance sheet events also referred to, as subsequent events are those events both favourable and unfavourable that occurs between the balance sheet date and the date when the financial statements are authorized for issue.
The audit procedures that the auditor would carry out in regard to post balance sheet events include the following:
- Reviewing procedures management has established to ensure that subsequent events are identified and inquiring whether any such events have occurred which might affect the financial statements being reported on;
- Reading minutes of the meetings of the board of directors and audit committees held after the end of the financial period. By reading such minutes the auditor is able to identify any material subsequent events that might have occurred since this would ordinarily be discussed at these meetings;
- Review the entity‘s latest available interim financial statements and other reports such as budgets, cash flow forecasts. By reading such interim financial statements the auditor is able to identify any subsequent events;
- Inquiring from the entity‘s lawyers on litigation and legal claims against the company. This will provide further details on any developments on such litigations.;
- Inquiring from management whether any subsequent events have occurred which might affect the financial statements