Key Takeaways
- ISA 560 addresses the auditor's responsibilities regarding events that occur after the reporting date — potentially affecting the financial statements or the auditor's report.
- The standard distinguishes three time periods, each with different auditor obligations: (1) between the reporting date and the auditor's report date (active duty), (2) between the auditor's report date and the date the financial statements are issued (limited duty), and (3) after the financial statements are issued (no active duty, but responsive obligations).
- During the active period (reporting date to auditor's report date), the auditor must perform specific procedures to identify events that require adjustment or disclosure — including inquiries of management, reading minutes, and reviewing interim financial information.
- Adjusting events provide evidence of conditions that existed at the reporting date and require the financial statements to be amended. Non-adjusting events are conditions that arose after the reporting date and require disclosure only (if material).
- After the auditor's report date, the auditor has no obligation to perform further procedures — but if facts come to light that would have caused the auditor to amend the report, the auditor must discuss with management, determine whether amendment is needed, and take appropriate action.
- After the financial statements are issued, if the auditor becomes aware of facts that existed at the report date and would have changed the report, the auditor must discuss with management and governance, determine whether the financial statements need to be revised, and — if management refuses to act when revision is necessary — take steps to prevent reliance on the original report.
What is ISA 560?
ISA 560, titled "Subsequent Events," governs the period between the balance sheet date and the point at which the financial statements reach their intended users. Events do not stop happening when the reporting period ends — customers go bankrupt, legal claims are resolved, assets are destroyed, and markets move. Some of these events have implications for the financial statements; the auditor's job is to ensure they are properly dealt with.
The standard operates in conjunction with the applicable financial reporting framework — particularly IAS 10 Events after the Reporting Period for IFRS reporters — which determines whether an event requires adjustment or disclosure.
The Three Time Periods
ISA 560 divides the subsequent events landscape into three distinct phases with different auditor obligations:
Reporting Auditor's Financial Statements Date Report Date Issued | | | | PERIOD 1 | PERIOD 2 | PERIOD 3 | (Active | (Limited | (Reactive | duty) | duty) | duty) |___________|__________________|________________>
Period 1: Reporting Date to Auditor's Report Date
The active duty
This is the primary focus of ISA 560. The auditor must perform procedures designed to obtain sufficient appropriate evidence that all events requiring adjustment or disclosure have been identified. The auditor's report date is the latest point at which these procedures must be completed.
Required procedures
ISA 560.7 specifies the procedures:
- Review management's procedures for identifying subsequent events.
- Inquire of management (and, where appropriate, those charged with governance) about whether any subsequent events have occurred that might affect the financial statements. Specific inquiries should cover:
- New commitments, borrowings, or guarantees.
- Sales or acquisitions of assets (occurred or planned).
- Increases in capital or issuance of debt instruments.
- Agreements to merge or liquidate.
- Assets seized by government or destroyed (e.g., by fire or flood).
- Developments regarding contingencies and provisions.
- Unusual accounting adjustments.
- Events that call into question the appropriateness of accounting policies (e.g., events calling into question going concern).
- Events relevant to the measurement of estimates or provisions.
- Read minutes of meetings of shareholders, those charged with governance, and relevant committees held after the reporting date, and inquire about matters discussed at meetings for which minutes are not yet available.
- Read the entity's latest available interim financial statements, if any.
Written representations
ISA 560.9 requires the auditor to obtain a written representation from management (and, where appropriate, those charged with governance) that all events occurring between the reporting date and the auditor's report date that require adjustment or disclosure have been adjusted or disclosed.
Adjusting vs. non-adjusting events
The distinction comes from the financial reporting framework (IAS 10 for IFRS):
| Adjusting Events | Non-Adjusting Events |
|---|---|
| Provide evidence of conditions that existed at the reporting date | Indicate conditions that arose after the reporting date |
| Financial statements must be amended | Disclosed in the notes if material |
| Customer bankruptcy confirming a receivable was irrecoverable at year-end | Destruction of a plant by fire after year-end |
| Settlement of a legal case confirming the obligation existed at year-end | Announcement of a major acquisition after year-end |
| Discovery of fraud or error that shows the financial statements were incorrect | Decline in market value of investments after year-end |
| Determination of the cost of assets purchased before year-end | Major restructuring plan announced after year-end |
The going concern connection
One of the most significant subsequent events is information that casts doubt on the entity's ability to continue as a going concern. If the auditor becomes aware, during the subsequent events review, of events or conditions that raise substantial doubt about going concern, the implications are significant — potentially affecting the entire basis of preparation. ISA 570 (Going Concern) applies, and the auditor must consider the adequacy of disclosures and the effect on the audit opinion. Never treat going concern indicators discovered during the subsequent events review as routine.
Period 2: Auditor's Report Date to Date Financial Statements Are Issued
The limited duty
ISA 560.10 states that after the auditor's report date, the auditor has no obligation to perform any additional procedures regarding the financial statements.
However, ISA 560.10 also recognises a practical reality: management is responsible for informing the auditor of facts that may affect the financial statements during this period (this should be included in the engagement letter under ISA 210).
If facts become known
ISA 560.11–12 provides the framework for when the auditor does become aware of facts during this period that, had they been known at the auditor's report date, might have caused the auditor to amend the report:
- Discuss the matter with management and, where appropriate, those charged with governance.
- Determine whether the financial statements need amendment.
- If amendment is needed, inquire how management intends to address the matter.
If management amends the financial statements
If management amends the financial statements, the auditor must:
- Perform the audit procedures necessary on the amendment.
- Either extend the subsequent events review procedures to the date of the new auditor's report, or alternatively use dual dating — restricting the additional date to the specific amendment.
Dual dating means the auditor's report carries two dates: the original date for the financial statements as a whole, and a later date restricted to the note or disclosure affected by the subsequent event. This limits the auditor's responsibility for new subsequent events to only the specific matter that caused the amendment.
If management refuses to amend
If the auditor concludes the financial statements should be amended but management refuses, the auditor must consider the implications. If the report has not yet been provided to the entity, the auditor should modify the opinion. If the report has already been provided, the auditor should notify management and those charged with governance not to issue the financial statements before the necessary amendments are made — and if they are issued without amendment, take action to prevent reliance on the auditor's report.
Period 3: After the Financial Statements Have Been Issued
The reactive duty
ISA 560.14 states that after the financial statements have been issued, the auditor has no obligation to perform any procedures regarding the financial statements.
If facts become known
ISA 560.14–17 addresses the situation where the auditor becomes aware of facts that existed at the date of the auditor's report which, if known at that date, may have caused the auditor to amend the report:
- Discuss the matter with management and, where appropriate, those charged with governance.
- Determine whether the financial statements need revision.
- If revision is needed, inquire how management intends to address the matter.
If management revises the financial statements, the auditor must perform procedures on the revision, issue a new auditor's report (which must not be dated earlier than the date of the revision), and extend subsequent events procedures to the date of the new report.
If management does not take the necessary steps to ensure that anyone in receipt of the previously issued financial statements is informed and the financial statements are revised, the auditor must notify management and those charged with governance that the auditor will seek to prevent future reliance on the auditor's report. The specific action depends on the jurisdiction — it may involve notifying regulators, members, or other parties.
ISA 560 in Your Jurisdiction
Netherlands. COS 560 follows ISA 560 closely. Dutch company law specifies the process for signing and issuing financial statements (vaststelling van de jaarrekening), which affects the timeline for subsequent events. The AFM examines whether auditors have performed adequate subsequent events procedures, particularly in the period between fieldwork completion and the auditor's report date.
Germany. IDW PS 560 adapts ISA 560. German practice integrates subsequent events into the Bestätigungsvermerk (audit opinion) and the Prüfungsbericht. The AG and GmbH corporate governance structures (Aufsichtsrat approval, Gesellschafterversammlung) affect the timeline and the auditor's responsibilities. German commercial law has specific requirements for Nachtragsbericht (subsequent events report).
United Kingdom. ISA (UK) 560 is substantively aligned with ISA 560. UK company law specifies the date of approval of the financial statements by the board of directors as a key milestone. The FRC's inspections focus on whether auditors have maintained adequate subsequent events procedures through to the date of the auditor's report, particularly where there is a significant gap between fieldwork completion and report signing.
France. NEP 560 implements ISA 560. French company law requires specific procedures around the arrêté des comptes (approval of accounts) and the date of the assemblée générale (shareholders' meeting). The commissaire aux comptes has specific obligations regarding events occurring between the arrêté des comptes and the assemblée générale, including the obligation to report certain events in the rapport de gestion or to the shareholders directly.
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Frequently Asked Questions
What is the difference between the auditor's report date and the date the financial statements are issued?
The auditor's report date is the date the auditor signs the report — this is when the auditor has obtained sufficient appropriate evidence, including completion of subsequent events procedures. The date of issue is when the financial statements (with the auditor's report) are made available to third parties. There can be a significant gap between the two, particularly for entities with complex governance processes.
Must the auditor perform procedures right up to the date they sign the report?
Yes. ISA 560.7 requires procedures to cover events up to the date of the auditor's report. If there is a delay between completing fieldwork and signing the report, the auditor must update the subsequent events review to cover the intervening period.
What is dual dating?
When the financial statements are amended after the original auditor's report date, the auditor may "dual date" the report — keeping the original date for the financial statements as a whole and adding a second, later date restricted to the specific amendment. This avoids the need to extend all subsequent events procedures to the new date; the extended procedures are limited to the specific amendment.
What if the auditor learns of a material subsequent event after signing but before issuance?
The auditor must discuss with management, determine if amendment is needed, and act accordingly. If the financial statements are amended, the auditor performs procedures on the amendment and either dual dates or re-dates the report. If management refuses to amend when the auditor believes amendment is necessary, the auditor takes steps to prevent reliance on the original report.
Further Reading and Source References
- IAASB Handbook 2024 — ISA 560 full text — The authoritative source including all application material.
- IAS 10 — Events after the Reporting Period — the IFRS standard governing adjusting and non-adjusting events.
- ISA 570 (Revised) — Going Concern — relevant when subsequent events raise going concern doubts.
- ISA 700 (Revised) — Forming an Opinion and Reporting — relevant to the effect of subsequent events on the auditor's report.
- ISA 705 (Revised) — Modifications to the Opinion — relevant when subsequent events are not properly reflected.