Subsequent events and the auditor: ISA (UK) 560

Q: How might this play out?

Illustration only. A wholesaler's year end is 31 December. The directors approve the accounts on 20 May and the auditor signs the same day. Before signing, the auditor reads the April board minutes, which mention that a major customer has gone into administration owing money at the year end. The debt existed at 31 December, so the event is adjusting and the directors increase the bad debt provision before approval. On 10 June, before the accounts are sent to members, the directors learn that the warehouse flooded in early May, destroying stock. This is a non adjusting event that may need disclosure. Under paragraph 10 the auditor discusses it with the directors, who add a note. The auditor audits the note and, restricting its procedures to that amendment, dual dates the report.

Q: What do companies and auditors get wrong?

Leaving a long gap between approval and signing. The auditor's procedures must run to its report date, so delay means more work. Not keeping minutes after the year end. Without minutes or management accounts the auditor falls back on books and bank statements. Treating every later event as adjusting. Only events giving evidence of conditions at the year end are adjusted; others may need disclosure. Assuming the auditor will spot things after signing. The duty to tell the auditor of facts arising before issue sits with the directors, as the engagement terms normally record. Ignoring going concern. Events after the year end can undermine the basis of preparation; see going concern and the auditor. Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

ISA (UK) 560 requires the auditor to perform procedures covering the whole period from the year end to the date of the auditor’s report, to find events that need adjusting or disclosing in the accounts. After the report is signed the auditor has no duty to keep looking, but if it learns of a fact that might have changed its report, it must discuss it with the directors and, where the accounts need amending, audit the amendment and issue a new report.

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What is a subsequent event for audit purposes?

Paragraph 5(e) of ISA (UK) 560 defines subsequent events as events occurring between the date of the financial statements and the date of the auditor’s report, and facts that become known to the auditor after the date of the auditor’s report. The standard therefore covers two quite different periods: before signing, when the auditor must actively look, and after signing, when it must react to what it learns.

Paragraph 2 notes that financial reporting frameworks ordinarily identify two types of event: those that provide evidence of conditions that existed at the date of the financial statements, and those that provide evidence of conditions that arose afterwards. Under UK GAAP this is Section 32 of FRS 102, explained in events after the reporting period. ISA (UK) 560 deals with the auditor’s side: making sure such events are found and correctly reflected.

Paragraph 5 also distinguishes several dates that are easy to confuse:

Date of the financial statements: The end of the latest period covered, usually the balance sheet date.
Date of approval of the financial statements: The date on which all the statements, including notes, have been prepared and those with recognised authority have asserted that they have taken responsibility for them.
Date of the auditor’s report: The date the auditor puts on its report under ISA (UK) 700.
Date the financial statements are issued: The date the auditor’s report and audited financial statements are made available to third parties.

Why does the date on the audit report count for so much?

Paragraph 2 explains that the date of the auditor’s report tells the reader that the auditor has considered the effect of events and transactions it became aware of and that occurred up to that date. Paragraph A3 says the report cannot be dated earlier than the date the auditor has obtained sufficient appropriate evidence, including evidence that the financial statements have been approved, so it cannot be earlier than the date of approval.

In practice this means signing should happen promptly after the directors approve the accounts, as described in approving and signing company accounts. A long gap between approval and the audit report widens the period the auditor must cover.

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What must the auditor do before signing?

Paragraph 6 requires procedures designed to obtain sufficient appropriate evidence that all events between the year end and the report date that require adjustment or disclosure have been identified. The auditor is not expected to repeat procedures that have already given satisfactory conclusions. Paragraph 7 says the procedures must cover the period up to the report date, or as near as practicable, and must include:

understanding any procedures management has set up to identify subsequent events;
inquiring of management and, where appropriate, those charged with governance whether any subsequent events have occurred that might affect the financial statements;
reading minutes of meetings of owners, management and those charged with governance held after the year end, and asking about meetings where minutes are not yet available; and
reading the latest subsequent interim financial statements, if any.

Paragraph A9 lists specific inquiries the auditor may make, including whether new borrowings or guarantees have been entered into, whether assets have been sold or acquired, whether shares or debentures have been issued, whether assets have been destroyed, whether there have been developments on contingencies, and whether anything calls the going concern basis into question. Paragraph A8 adds reading budgets and cash flow forecasts and extending inquiries of the company’s legal counsel, which links to auditor enquiries into litigation and claims.

Paragraph A7 is particularly relevant to smaller companies. Where the accounting records are not up to date and there are no interim accounts or minutes, relevant procedures may consist of inspecting the available books and records, including bank statements.

Finally, paragraph 9 requires the auditor to request a written representation that all events after the year end that require adjustment or disclosure have been adjusted or disclosed. See management representation letters.

What happens if something comes to light after signing but before the accounts go out?

Paragraph 10 says the auditor has no obligation to perform procedures after the report date. But if, before the financial statements are issued, a fact becomes known that might have caused it to amend its report, it must discuss the matter with management and, where appropriate, those charged with governance, determine whether the financial statements need amendment and, if so, ask how management intends to address it. A UK footnote records that responsibility for amending the financial statements rests with those charged with governance.

If the accounts are amended, paragraph 11 requires the auditor to audit the amendment, extend its subsequent events procedures to the new report date, and provide a new report dated no earlier than approval of the amended accounts. Paragraph 12 allows the auditor, where the law and framework permit the directors to restrict the amendment to the effects of the event, to restrict its procedures to that amendment and either dual date the report or include an emphasis of matter or other matter paragraph. Paragraph A13 gives the dual dating form: the original report date, “except as to Note Y, which is as of” the later date.

If the directors refuse to amend, paragraph 13 requires the auditor to modify its opinion if the report has not yet been provided; if it has, the auditor must notify the directors not to issue the financial statements to third parties until amended, and take appropriate action to seek to prevent reliance if they are issued anyway.

What if the accounts have already been issued?

Paragraph 14 again says there is no duty to keep auditing, but if the auditor learns of a fact that might have caused it to amend its report, it must discuss the matter, determine whether amendment is needed and ask how management will deal with it. If the accounts are amended, paragraph 15 requires the auditor to audit the amendment, review the steps taken to inform anyone who received the original accounts and report, and issue a new or amended report. Paragraph 16 requires that report to include an emphasis of matter or other matter paragraph referring to the note explaining the amendment and to the earlier report; see emphasis of matter paragraphs.

A UK footnote points to section 454 of the Companies Act 2006, which lets directors voluntarily revise accounts that did not comply with the Act. Where revised accounts replace the originals, regulation 4 of the Companies (Revision of Defective Accounts and Reports) Regulations 2008 requires a statement that they have been prepared as at the date of the original accounts and do not deal with events between those dates. The process is covered in revised and defective accounts.

The UK application material to paragraph 14 deals with a fact that did not exist at the date of the report. There are no statutory provisions for revising accounts in that case; the auditor discusses with those charged with governance whether to withdraw the accounts, and legal advice may help. It also notes the auditor’s right under section 502 to attend general meetings and be heard on business that concerns it as auditor, which could include a statement about facts discovered after signing. The UK guidance on preventing reliance adds that the auditor has no statutory right to communicate directly in writing with members.

How might this play out?

Illustration only. A wholesaler’s year end is 31 December. The directors approve the accounts on 20 May and the auditor signs the same day. Before signing, the auditor reads the April board minutes, which mention that a major customer has gone into administration owing money at the year end. The debt existed at 31 December, so the event is adjusting and the directors increase the bad debt provision before approval.

On 10 June, before the accounts are sent to members, the directors learn that the warehouse flooded in early May, destroying stock. This is a non adjusting event that may need disclosure. Under paragraph 10 the auditor discusses it with the directors, who add a note. The auditor audits the note and, restricting its procedures to that amendment, dual dates the report.

What do companies and auditors get wrong?

Leaving a long gap between approval and signing. The auditor’s procedures must run to its report date, so delay means more work.
Not keeping minutes after the year end. Without minutes or management accounts the auditor falls back on books and bank statements.
Treating every later event as adjusting. Only events giving evidence of conditions at the year end are adjusted; others may need disclosure.
Assuming the auditor will spot things after signing. The duty to tell the auditor of facts arising before issue sits with the directors, as the engagement terms normally record.
Ignoring going concern. Events after the year end can undermine the basis of preparation; see going concern and the auditor.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.