SA 560 splits the auditor's responsibility for events occurring after the balance sheet date into three distinct periods, each carrying a different obligation. Up to the date of the auditor's report, the auditor has an active duty to perform procedures designed to identify subsequent events requiring adjustment or disclosure. Between the report date and the date the financial statements are issued, the auditor has no active duty to perform further procedures, but if a fact becomes known that would have affected the report had it been known earlier, action is required. After issuance, the auditor generally has no obligation to make any inquiry regarding the financial statements at all, though specific action is still required if a fact becomes known that existed at the report date and might have changed it.
The two kinds of subsequent event
| Type | What it means | Example |
|---|---|---|
| Adjusting event | Provides evidence of a condition that existed AT the balance sheet date | A customer's bankruptcy filed after year end, confirming a receivable was already uncollectible at the balance sheet date |
| Non-adjusting event | Indicative of a condition that arose AFTER the balance sheet date | A fire destroying a warehouse after year end — the loss relates to a new event, not a condition existing at the balance sheet date, though disclosure may still be required |
What active procedures up to the report date actually involve
- 01Review management's own procedures for identifying subsequent eventsDoes the entity itself have a process for this, and did it operate?
- 02Read minutes of meetings held after the balance sheet dateBoard and committee minutes covering the period up to the report date, inquiring about matters discussed where minutes aren't yet available.
- 03Read the entity's latest available interim financial informationWhere it exists, for signals of a condition relevant to the period under audit.
- 04Make specific inquiries of management and, where appropriate, those charged with governanceAbout new commitments, borrowings, guarantees, asset sales, litigation developments, and any other matters affecting the financial statements.
What happens if a fact surfaces after the report date
If a fact becomes known after the report is issued that would have caused the auditor to amend the report had it been known at the time, SA 560 requires discussing the matter with management and, where the financial statements need amendment, performing procedures on the amendment and issuing a new or amended report — a notably more involved process than discovering the same fact before the original report date, and not something the standard allows to simply be set aside as "too late to matter."
How we think about this
The three-period structure exists because an auditor's practical ability to find out about something changes sharply after the report is signed and issued — the standard calibrates the obligation to that reality rather than pretending the duty to investigate continues at full strength indefinitely.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit documentationSA 580: written representations, and why they're not a substitute for evidenceA signed representation letter is not evidence that something is true. It's evidence that management told you it was true — a different and much weaker thing.
- Audit workflow & automationSA 570: going concern, and when it actually changes the audit reportMost going-concern evaluations end exactly where they should: no material uncertainty, no change to the report. The standard is about the minority of cases where that's not true.
- Audit documentationSA 230: what actually has to be in the fileThe experienced-auditor test explained in plain terms, what documentation has to demonstrate, when the file has to be assembled, and the gaps that most often draw comment on review.
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