Definition
AU-C 560 addresses facts that existed at the date of the auditor's report, became known after the report was released, and would have caused the auditor to revise the report had they been known. The auditor has no duty to search for such facts. When one surfaces, the auditor discusses it with management and those charged with governance and decides whether the financial statements need revision.
Why it matters in an audit or review
If management revises the statements, the auditor performs the needed procedures and issues a new or amended report that includes an emphasis-of-matter or other-matter paragraph referring to the note that explains the revision. If management refuses and the statements are still in the hands of users who may rely on them, the auditor notifies management and those charged with governance and takes steps to prevent further reliance. Legal advice is common here.
Example
Illustrative: two months after release, the client learns that a large customer's receivable was fictitious at year end. The auditor meets with management, determines the facts existed at the report date, and asks management to reissue corrected statements.
Common mistakes
Treating a post-year-end event as a discovered fact. Events that began after the report date belong to a different analysis.
FAQ
Does the auditor have to keep looking after release?
No. The duty arises only when the auditor becomes aware of such facts.
Sources
- AICPA, AU-C Section 560, Subsequent Events and Subsequently Discovered Facts (facts discovered after the report release date)
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error