Many of you question about dating in independent’s auditor report and related issue. SAP 47 covered the subject matter of this. On other hand SAS 29, created a difference in responsibilities for types of reissued reports. If the client is furnished with additional copies of a previously issued report, the auditor has no responsibility to perform any procedures prior to reprinting the report unless the auditor has become aware of the need to adjust or make disclosure in the financial statements. In the case of a predecessor auditor consenting to reuse a previous report, additional procedures are always required.
This post discusses those parts of the SAP that told the auditor how to date the report in the following circumstances:
- Under ordinary conditions.
- Subsequent events.
- Reissuance of report.
Some related topic [i.e. unaudited note, unusual conditions and determining the date of completion of fieldwork] are also discussed. Enjoy!
Under ordinary conditions, the auditor should date his or her report as of the date of completion of fieldwork. The auditor does not have to make inquiries or apply other auditing procedures after the date of his or her report under ordinary conditions. However, additional procedures might be required.
[a]. Subsequent Events Requiring Adjustment of Financial Statements – Some events that require adjustment might be made without disclosure, but some events require additional disclosure to be understood.
- Financial statements adjusted, no disclosure. When the adjustment is made but disclosure of the event is not necessary, the auditor’s report should be dated as of the date of completion of fieldwork.
- Financial statements adjusted, disclosure. When the adjustment is made with disclosure of the event, the auditor should dual date the report or date it as of the date of the event.
- Financial statements not adjusted. If the financial statements are not adjusted, the auditor should qualify his or her opinion or, if appropriate, express an adverse opinion.
[b]. Subsequent Events Requiring Disclosure – Some subsequent events only require disclosure of information in the notes to the financial statements.
- Disclosure made. Disclosure would be made in a note to the financial statements, but might also be referred to in the auditor’s report. In either circumstance, the auditor should dual date his or her report or date it as of the event.
- No disclosure. If the subsequent event is not disclosed, the auditor should qualify the opinion, or if appropriate, express an adverse opinion. In these circumstances, the auditor should either dual date the report or date it as of the date of the event.
Subsequent Events Review
A subsequent events review is the auditor’s review of transactions and events occurring after the date of the balance sheet and up to the date of the auditor’s report. Its purpose is to determine whether the financial statements being reported on require adjustment or additional disclosures.
If the auditor dates the report as of the date of the subsequent event rather than dual dating the report he or she should extend the subsequent events review to that date.
Reissuance Of Report
When the auditor reissues the report and uses the original report date, he or she does not have to investigate or inquire about events affecting the financial statements reported on that may have occurred between the original date and the reissuance date.
Note: If the auditor is a continuing auditor, the report has to be updated. If the auditor is a predecessor auditor and the client is reusing the report, additional procedures are required, including a requirement to obtain an updating representation letter from management and a representation letter from the successor auditor.
Events Requiring Adjustment or Disclosure – The auditor may be aware of an event that occurred between the original report date and the reissuance date that affects the financial statements reported on. This event may require disclosure to prevent the financial statements from being misleading. Events occurring between the original report date and the reissuance date do not require adjustment of the financial statements unless the adjustment results in the correction of an error.
When the auditor reissues the report and the financial statements have been adjusted or events have been disclosed in the notes, he or she should dual date the report or date it as of the date of the event responsible for the adjustment or the disclosure.
Note: The effect of the event may cause the auditor to express an opinion different from the one he or she originally expressed.
An event that requires disclosure only may be disclosed in a note to the financial statements marked “unaudited.” In these circumstances, the auditor’s report would have the original date. An example of the heading to use for this type of note follows: Event (Unaudited) Subsequent to the Date of the Report of the Independent Auditor.
Under ordinary conditions, the auditor has no responsibility to make any inquiry or carry out any procedures for the period after the date of his or her report. An exception might arise if the audit report is reissued as explained previously. An exception might also arise in either of the following circumstances.
- Subsequent Discovery of Facts – If, subsequent to the date of the report, the auditor becomes aware of facts that may have existed at that date which might have affected the report, additional procedures are required.
- Filing under the 1933 Act – If the financial statements subsequently are incorporated in a filing under the Securities Act of 1933, additional procedures are required.
Determining The Date Of Completion Of Fieldwork
There is no authoritative pronouncement that provides guidance on how to determine the date of completion of fieldwork. The date is usually the same as the date of the management representation letter and the date up to which lawyers are asked to respond concerning litigation, claims, and assessments.
Ordinarily, the date of completion of the fieldwork is the date on which the auditor in charge of the engagement and the client’s chief financial officer agree on the form and content of the financial statements.
The auditor and the client may arrange for a formal closing conference to review the financial statements. The conclusion of this conference may be considered the date of completion of the fieldwork. If there is no formal closing conference, the date of completion of the fieldwork may be considered to be the date the audit staff finally leaves the client’s premises, provided no significant adjustments are expected after that date.
If any procedures that are necessary to the expression of an opinion are performed after the audit staff leaves the client’s premises, the substantial completion of those procedures is the completion of fieldwork. Additional advice on issues concerning dating of the audit report is presented in the Techniques for Application section of Section 560.
Period Between Completion Of Fieldwork And Issuance Of Auditor’s Report
Ordinarily, there is a lapse of two to three weeks between the date of the auditor’s report (the date of completion of the fieldwork) and its issuance:
- During this period, the auditor might review the audit documentation a final time to make certain there are no open items, put the audit documentation in a form suitable to be filed, and prepare the final audit report and financial statements.
- During this period, the auditor is not required to apply any procedures unless information about subsequent events comes to the attention of the auditor.
- If the period between the date of the auditor’s report and the issuance of the financial statements exceeds approximately three weeks, it would be prudent for the auditor to call the client and inquire about subsequent events.
- If the delay is unusually long, it may be advisable to extend the subsequent events review and redate the report.
Dual Dating Report
When an event that requires disclosure or adjustment of financial statements occurs between the date of the auditor’s report and the issuance of the financial statements, or between the date of issuance and the date of reissuance, the auditor may dual date the report or extend the date of the report and the subsequent events review to the date of the event. Because extending the date of the report extends the auditor’s responsibility, the auditor is acting prudently in always dual dating reports requiring disclosure of subsequent events.
An example of the dual dating of an auditor’s report is as follows:
February 16, 20X1, except for Note X as to which the date is February 25, 20X1.
Date of auditor’s report – Date of completion of auditor’s fieldwork.
Note: Ordinarily, this is the date that the auditor and the client agree on the form and content of the financial statements. Sometimes, the date is a matter of judgment (see Techniques for Application). It is the date up to which the auditor is responsible for keeping informed about events affecting the financial statements being reported on.
Date of issuance – Date the auditor’s report is delivered to the client.
Reissued report – Auditor’s report issued subsequent to the date the original report was issued.
Note: “Reissued report” is used to refer broadly to subsequent reprinting by the auditor of a prior audit report with release to the client as well as reuse by the client in conjunction with issuance of a new document of a prior report. Reuse by the client requires that certain procedures be performed before the auditor can consent.
Dual-dated report – Auditor’s report with different dates: (1) the date of completion of fieldwork, and (2) the date a specific event occurred after completion of the fieldwork but before issuance of the auditor’s report.
Note: An auditor also may dual date a reissued audit report because of an event that occurs after issuance of the original audit report.
Subsequent events – For purposes of this section, events occurring after the date of the auditor’s report but before issuance of the related financial statements that require adjustment of or disclosure in the financial statements.