[Onepasscpamaster]

I tried to find clear answer to this question but was not able to find correct answer from pcaob or aicpa.

I hope you can help me out on this.

If court case settled on the date of financial statement release date, is auditor responsible to make adjustment on financial statement and disclose it ?

for example, auditor issued financial statement on 3/31, court judgement settled on the same date, what is the auditor’s responsibility on this situation?

Many thanks in advance

[jamesb]

Auditor don't issue F/S..Mgmt does.

Auditor only express an opinion

Two factors you need to look at when dealing with subsequent events

1-event itself

2- condition– that caused that event

So, for your question, if the condition existed before B.S date (12/31) then adjustment need

If condition did NOT exist @ B.S date, but existed before issuance of F/S (2/3) then only disclosure

AUD: TBA-
FAR Done
BEC Done

Becker
NINJA for AUD

[Onepasscpamaster]

Oops I meant financial statement was issued on 3/31, court judgement settled on the same date

sorry for the confusion.

So If litigation case was existed before B/S Date (12/31) and settled ON the same date(2/3) that F/S (2/3) was issued,

auditor should make adjustment and disclose it?

[sln1000]

What if the auditor comes to know of the judgement after the financials are issued but the condition existed on the B/S date?. Practically for a huge company, it would have issued tens of thousands of Annual Report. It is not easy to reissue a fresh financials.

BEC: 77(Nov 2010), 81(Jul 2012).
FAR: 80(Jul 2012).
REG: 72(Jul 2012), 78(Oct 2012).
AUD: 71(Nov 2010),74(Jul 2012),74(Oct 2012),75(Jan 2013)- Thanks God, without you i couldnt have done this. I'M DONE !!!

[Anonymous]

Remember when you are auditing you also contact the client's lawyer to find out if they have any litigations pending. If you have litigations pending and you are not too sure what the judgement is going to be this has to be disclosed in the financial statements. So, the auditor has to make sure that there were disclosures in the F/S due to the pending litigation. If its properly disclosed then you issue your unqualified opion without an explanatory paragraph. And as stated above, management is responsible for making that disclosure.

[jamesb]

@Onepasscpamaster…answer is Yes.

@sln1000…There is a rule that answer your concern. The Auditor responsibility stops, when F/S are issued, usually it is also the same day, when Auditor report is issued. So, Auditor has NO RESPONSIBILITY after that date. But if its material effect, I think Auditor is require to require to contact B.O.D, if they B.O.D, refuse, then Auditor should Disassociate, Alert agencies relying on report, request MGMT to re-issue F/S.

AUD: TBA-
FAR Done
BEC Done

Becker
NINJA for AUD

[Author]

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