VIETNAMESE STANDARDS ON AUDITING
STANDARD No. 560
SUBSEQUENT EVENTS
(Issued in pursuance of the Finance Minister’s Decision No. 28/2003/QD-BTC dated 14 March 2003)
GENERAL PROVISIONS
01. The purpose of this standard is to prescribe the basic principles and procedures and guide the modes of application thereof to the responsibility of auditors and audit firms when considering subsequent events for auditing in the process of auditing the financial statements.
02. Auditors must consider the effect of subsequent events on the financial statements and the auditing reports.
03. This standard shall apply to the audit of financial statements and also to the audit of other financial information of audit firms.
Auditors and audit firms must observe the provisions of this standard in the process of auditing financial statements.
The audited units (clients) must possess necessary knowledge of this standard so that they can cooperate with auditors in supplying information and materials relating to the subsequent events.
The terms in this standard are construed as follows:
04. Subsequent events mean events affecting the financial statements, which have occurred after Period ends till The date of audit report; and events detected after The date of audit report.
There are two kinds of subsequent events:
a/ Events that provide further evidences of the events that existed up to Period ends;
b/ Events that provide signs of events that arose after Period ends.
05. Period ends means the date lasting till the end of the last day of the accounting year. For example, if the accounting year spans from January 1 to December 31 of the calendar year, Period ends lasts until the 24th hour of December 31 of such year.
06. The date of financial statement means the date inscribed on a financial statement above the section reserved for the director’s (or authorized person’s) signature and the stamp of the audited unit. The date of financial statement must be subsequent to Period ends.
07. The date of audit report means the date inscribed on an auditing report above the section reserved for the auditor’s signature, the director’s (or authorized person’s) signature and the stamp of the audit firm. The date of audit report may be either the date of actually signing the auditing report or the date when the audit work finishes at the audited unit. The audit firms must decide on their own The date of audit report which, however, must be subsequent to or coincide with The date of financial statement.
08. The financial statement publicization date means the date of the postmark or the earliest date of signing for receipt of the financial statements and auditing reports which are submitted to the State bodies or publicized.
CONTENTS OF THE STANDARD
09. Subsequent events and relating to the responsibility of auditors and audit firms are classified into three stages:
- Events occurring up to The date of audit report;
- Events discovered after The date of audit report but before the financial statement publicization date;
- Events discovered after the financial statement publicization date.
Events occurring up to The date of audit report
10. Auditors must establish and perform audit procedures to gather sufficient appropriate audit evidences in order to determine all events occurring up to The date of audit report, which may affect the financial statements, and request the units to make adjustment of, or present explanations in, the financial statements. These procedures supplement routine procedures applied to special subsequent events in order to collect further audit evidences regarding account balances at the time of making financial statements. However, auditors are not required to consider all matters on which previously applied procedures have provided satisfactory conclusions. For example, examining the sale of inventory and the settlement of debts after the date of closing accounting books would provide evidences regarding the value of inventory in the financial statements.
11. The procedures to identify events that may require the audited units to adjust the financial statements or present explanations therein should be performed at a time nearest to The date of audit report and normally include the following steps:
+ Reviewing procedures the units have prescribed to ensure that all subsequent events are identified.
+ Reading minutes of the meetings of shareholders, the management boards, the Control Boards and the directorates held after Period ends, and inquiring about matters discussed at these meetings but not recorded in the minutes.
+ Reading the units’ financial statements of the latest period and the financial plans as well as other management reports of the directors.
+ Requesting the units or their lawyers to supply further information concerning the previously notified litigation and/or dispute cases or other litigation and dispute cases (if any).
+ Inquiring the units’ directors to identify events which occur after Period ends and may materially affect the financial statements, such as:
- Data temporarily calculated or not yet confirmed;
- Commitments, borrowings or guarantees, which have been recently entered into;
- Sales of assets, which have been effected or are planned;
- Newly issued shares or bonds;
- Merger or dissolution agreements, which have been signed or are planned;
- Assets which have been appropriated or destroyed due to fire or flood…
- Risks or contingencies;
- Unusual accounting adjustments, which have been made or are planned;
- Events which have occurred or are likely to occur and thereby render inappropriate the accounting policies already used for making financial statements. For example, the occurrence of bad debts would render invalid the presumption on the continuity of business activities.
12. Where a subordinate unit (a company’s branch or a company under a corporation) is audited by another independent audit firm, auditors who audit the superior unit must consider the procedures applied by such audit firm’s auditors to the subsequent events and examine whether or not they need to inform such audit firm of the expected date of signing their auditing reports.
13. When recognizing that the subsequent events materially affect the financial statements, auditors must determine whether these events are correctly calculated and properly presented in the audited financial statements.
Events discovered after The date of audit report and before the financial statement publicization date
14. Auditors are not required to apply procedures or review matters relating to the financial statements after The date of audit report. The directors of the audited units shall, however, have to notify the auditors or audit firms of the events which have occurred after The date of audit report and before the financial statement publicization date and may affect the audited financial statements.
15. Where auditors become aware of an event which occurs after The date of audit report and before the financial statement publicization date and may materially affect the financial statements, they must consider whether or not the financial statements and auditing reports need to be amended and must discuss this matter with the audited units’ directors so as to take appropriate measures in each particular circumstance.
16. Where, at the auditors’ request, the directors of the audited units accept to amend the financial statements, the auditors shall perform necessary procedures suitable to the practical circumstances and then provide the audited units with a new report based on the amended financial statements. The new auditing report must be signed at the same date of the amended financial statements or at a later date. In this case, auditors must perform the audit procedures specified at paragraphs 10 and 11 till the date of signing the amended auditing report.
17. Where the directors of the audited units do not amend the financial statements as requested by auditors, and the auditing reports have not yet been sent to the audited units, the auditors and audit firms shall make a new auditing report expressing a partial acceptance opinion or non-acceptance opinion.
18. Where events which have a material effect on the financial statements are discovered only after the auditing reports have been sent to the audited units, the auditors shall request the heads of the audited units not to publicize the financial statements and the auditing reports to third parties. If the units still decide to publicize these reports, the auditors must apply appropriate measures to prevent the third parties from using their auditing reports. The preventive measures taken will depend on the auditors’ legal powers and obligations as well as the recommendations of the auditors’ lawyers.
Events discovered after the financial statement publicization date
19. After the financial statements and the auditing reports have been publicized, auditors are not required to consider and examine any data or events relating to the audited financial statements.
20. After the financial statements and the auditing reports have been publicized, if auditors become aware of events which occurred up to The date of audit report and cause the auditors to modify the auditing reports, the auditors should consider whether the financial statements and the auditing reports need to be revised or not and must discuss this matter with the directors of the audited units and take appropriate measures in each particular circumstance.
21. Where the directors of the audited units accept to revise the financial statements, the auditors must carry out necessary appropriate procedures and review the measures taken by the audited units to ensure that any recipients of the financial statements and the auditing reports are informed of this matter. At the same time, the auditors and audit firms must publicize a new auditing report based on the revised financial statements.
22. The new auditing reports must contain a paragraph explaining the reasons for the revision of the previously publicized financial statements and auditing reports. The new auditing reports shall be signed at the same date of the revised financial statements or at a later date. In this case, auditors must perform the audit procedures specified at paragraphs 10 and 11 till the date of the revised auditing report.
23. Where the directors of the audited units do not notify the matter mentioned at paragraph 21 above to the recipients of the previously publicized financial statements and auditing reports nor revise the financial statements at the auditors’ requests, the auditors and audit firms must notify the directors of the audited units of the measures to be taken by the auditors to prevent the third parties from using the auditing reports. The preventive measures taken will depend on the auditors’ legal powers and obligations as well as the recommendations of the auditors’ lawyers.
24. Where the financial statements for the following fiscal year are being audited by the audit firms and are bound to be publicized, it may not be necessary to revise the financial statements and auditing reports for the preceding fiscal year provided that the matter mentioned at paragraph 21 above is clearly described in the representations on the financial statements for the following year.
Cases where the audited units issue securities
25. Where the audited units issue securities on the market, auditors must consider any law provisions relating to the securities issuance. For example, auditors may be required to carry out additional audit procedures till the date when the audited units post up securities issuance information. These procedures normally include measures specified at paragraphs 10 and 11 till the time of posting up information and reviewing documents on the posted information to ascertain that the posted information is consistent with the financial information already confirmed by the auditors./.