I am the auditor in a Trading company, and I am wondering what I should do in this case:A Limited C…
I am the auditor in a Trading company, and I am wondering what I should do in this case:
A Limited Company has filed a suit against trade receivable from whom Rs 25 lakhs are receivable. A judgement is received from court in favour of the company after the date of Balance Sheet.
What are my duties in this regard?
Jeeba Aug. 11, 2018
- This is the case of subsequent event that have occurred after the balance sheet date but before the date of audit report.
- In case of audit of branch or division the subsequent events are events after the balance sheet date and before the date of audit report of that component.
- The subsequent events are of two types- (a) those which provide further evidence of conditions that existed at the balance sheet date and (b) those which are indicative of conditions that arose subsequent to the balance sheet date.
- Depending upon the type of subsequent events, the auditor should decide on adjustment of accounts based on evidence value gathered for conditions that existed as on the date of balance sheet date or disclosure of the conditions arising subsequent to the date of balance sheet.
- The auditor should perform audit procedures to identify the subsequent events that are relevant for adjustment/disclosure. These procedures would include reading minutes of Board subsequent to accounting period, contacting lawyers for knowing progress of pending Cases, inquiry with the company management, scrutinizing subsequent interim accounts etc.
- The auditor should perform these procedures as near as practicable to the date of his audit report.
- If the management does not account for the subsequent events in the financial statements where they are to be accounted, the auditor should appropriately comment his report by a qualification or disclaimer.
