Subsequent Events
Events occurring after the balance sheet date but before the date of the auditor's report that may require adjustment or disclosure.
AUD loves the two-type sort: given a fact (a lawsuit settles, a customer goes bankrupt, a fire destroys a plant), decide whether the underlying condition existed at the balance-sheet date. If it did, it’s a Type I (recognized) event and you adjust the numbers; if it arose only after, it’s Type II (nonrecognized) and you disclose. The classic trap: treating a post-date customer bankruptcy as Type II when the receivable was already impaired at year-end (Type I). Tested procedures include reading minutes, the latest interim statements, and inquiry of management and legal counsel (AU-C 560).
Don’t confuse the report date cutoff with later discoveries: a fact found after the report date can be handled by dual dating, not a redo of the whole audit. The management representation letter is dated as of the report date, so it covers the full subsequent-events window. Keep going concern separate — that’s a forward “substantial doubt” judgment over a reasonable period (about one year), not a backward adjust-or-disclose call.
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