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8030 Subsequent Events
The purpose of this section is to set out OAG requirements and guidance with respect to the potential impact of “subsequent events” on a performance audit or a special examination report and the audit team’s related responsibilities.
Subsequent events refer to new information that comes to the attention of the auditor during the reporting phase of
- conditions that existed during the period covered by the audit, and
- information of events after the period of the audit,
when there is a possible impact on the content of the audit report.
CSAE 3001 Requirements
66. When relevant to the engagement, the practitioner shall consider the effect on the underlying subject matter and on the assurance report of events up to the date of the assurance report, and shall respond appropriately to facts that become known to the practitioner after the date of the assurance report that, had they been known to the practitioner at that date, may have caused the practitioner to amend the assurance report. The extent of consideration of subsequent events depends on the potential for such events to affect the underlying subject matter and to affect the appropriateness of the practitioner’s conclusion. However, the practitioner has no responsibility to perform any procedures regarding the underlying subject matter after the date of the assurance report. (Ref: Para. A141-A142)
CSAE 3001 Application Material
A141. Consideration of subsequent events in some assurance engagements may not be relevant because of the nature of the underlying subject matter. For example, when the engagement requires a conclusion about the accuracy of a statistical return at a point in time, events occurring between that point in time and the date of the assurance report may not affect the conclusion or require disclosure in the return or the assurance report.
A142. As noted in paragraph 66, the practitioner has no responsibility to perform any procedures regarding the underlying subject matter after the date of the practitioner’s report. However, if, after the date of the practitioner’s report, a fact becomes known to the practitioner that, had it been known to the practitioner at the date of the practitioner’s report, may have caused the practitioner to amend the report, the practitioner may need to discuss the matter with the appropriate party(ies) or take other action as appropriate in the circumstances.
The audit team shall consider subsequent events and new information obtained during the reporting phase of the audit, and the engagement leader shall assess the impact on the findings and conclusions of the audit report and its date. [Nov-2016]
When the period covered by the audit ends, there is a further period before the audit report is dated (OAG Audit 8017 Report content approval and date of the report). During that time, the audit team needs to remain alert to any evidence or events that may indicate that the findings and conclusions in the draft audit report are incorrect.
Examples of subsequent events that could occur include
- a new or a change in policy direction,
- a change in legislation,
- cancellation of a program,
- a change in the program agreement,
- outsourcing or in-sourcing of a program or service,
- a change in the responsible party’s organizational structure or its roles and responsibilities,
- identification of fraud or system failure, or
- a change in program delivery.
Audit teams can use the following procedures to identify subsequent events:
Inquiring of management and those charged with governance as to whether any subsequent events have occurred which might impact the report.
Obtaining an understanding of any management processes established to ensure that subsequent events are identified.
Reviewing minutes, if any, of the meetings of management and those charged with governance, that were held up to or after the date of the report and inquiring about matters discussed at any such meetings for which minutes are not yet available.
Reviewing performance measurement reports, if any, prepared up to or after the date of the assurance report.
Reviewing government media releases and Hansard to identify any events that may impact the assurance report.
There are two different possible scenarios where subsequent events could occur that could affect the content of the audit report: events that occur before the date of the report, and events that occur after the date of the report.
For each scenario, the team keeps the entity (or entities) apprised of changes to the audit report. Immediate discussions are particularly important if events result in changes to conclusions and recommendations.
Events occurring before the date of the report
There are two possible scenarios where subsequent events could occur before the date of the report.
Evidence falls within the original period covered by the audit.
If the audit team obtains evidence that was in effect within the original period covered by the audit (for example, new evidence, or a policy that the team was unaware of) that would have had an impact on the audit report had it been known earlier, the team considers the impact on the findings and conclusions in the report, performs additional procedures if necessary, and makes the necessary adjustments to the audit report.
Evidence falls outside the original period covered by the audit.
If, the team finds evidence of conditions pertinent to the audit report that did not exist during the period covered by the audit, there is no requirement to undertake additional audit work; however, the team must assess the impact on the findings and conclusions in the report. Typically, these events demonstrate management’s actions in the period following the audit. At the discretion of the engagement leader these events may be disclosed in a report section entitled “Subsequent Events.” If changes are made to the report, additional audit procedures may be required.
If, after the end of the period under examination, the audit team obtains evidence that was NOT in effect within the original period covered by the audit, the team considers the impact on the findings and conclusions in the report, and on the overall period under examination. An extension to the period under examination may be required, which in turn would necessitate additional audit work for all of the lines of enquiry. In this event, the team should consult with Audit Services.
Events occurring after the date of the report
If events occur after the date of the report, audit teams are not required to perform any procedures regarding the underlying subject matter, but should consider the impact on the findings and conclusions of the report. If facts or events become known that might have influenced the conclusion of the audit report had they been known earlier, the engagement leader should consult the assistant auditor general, and if necessary the Auditor General to determine whether the team should make the necessary adjustments to the audit report, and amend the date of the report. The team may consider discussing the matter with the audited entity. If changes are made to the report, additional audit procedures may be required.
Therefore, the audit teams may take action as appropriate in the circumstances. Such action may include:
- Determining if there is a significant impact of the subsequent event on the underlying subject matter.
- Considering whether an amendment to the report is needed.
- Determining the nature, timing and extent of additional audit procedures and performing them, as necessary.
If the audit team determines that the report needs to be amended, and the report has not been tabled, the team may
clarify that the effect of the event or fact on the underlying subject matter has been considered and there was no impact on the conclusion; or
when the effect of the event or fact on the underlying subject matter or potential impact on the assurance conclusion is significant, revise the assurance conclusion and change the date of the assurance report to the later date or disclose the impact of the subsequent event and include an additional date restricted to that amendment (dual date the report).
If the audit team determines that the report needs to be amended and the report has already been tabled, the audit team may consider whether to
issue a statement or addendum to the report that highlights the event or fact and communicate its impact on the assurance conclusion; or
take other action(s) as appropriate, such as issuing a press release to make users aware of the subsequent event or fact and its impact on the conclusion.