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CHAPTER 4 : AUDIT ASSURANCE
MUHAMMAD SHAHRIZUL MUIZ BIN MOHAMED
RAVIVARMA S/O MORGAN 10DAT11F2053
KOGILA DEWI D/O SANTHA RASE GARAN 10DAT11F2142
MEHALEI D/O KRISHNAN 10DAT11F2056
Define the subsequent event and after balance
Events occurring between the date of the
financial statements and the date of the auditor’s
report, and facts that become known to the
auditor after the date of the auditor’s report.
After balance sheet event
Favorable and unfavorable, that occur between
the reporting date and the date when the financial
report is authorized for issue.
Subsequent event After balance sheet event
The period after the balance
sheet date during which
management of a reporting
entity shall evaluate events or
transactions that may occur for
potential recognition or
disclosure in the financial
Objective When an entity should adjust its
financial statements for events after
balance sheet and the disclosures that an
entity should give about the date when
the financial report was authorized for
issue and about events after balance
Transactions that provide
additional evidence about
conditions that existed at the
date of the balance sheet,
including the estimates inherent
in the process of process of
preparing financial statements.
Events that provide evidence
that provide evidence about
conditions that did not exist at
the date of the balance sheet but
arose subsequent to that date.
Types Those that provide evidence of
conditions that existed at the reporting
date ( adjusting events after the reporting
Those that are indicative of conditions
that arose after the reporting date ( non-adjusting
events after the reporting date).
1.Settlement Of Court Case
2.Declaration Of Bankruptcy By A
Customer With Outstanding Accounts
Receivable Balance (Bad Debts
3.Sale Of Inventories
4.Disposal Of Dormant Equipment
5.Sale Of Investments At A Price Below
6.Determination Of Bonus Payment
7.Discovery Of Fraud/Errors
1. Decline In The Market Value Of Investments
2. Declaration Of Dividend To Equity Holders
3. Major Business Combination
4. Announcement To Discontinue Operation
5. Major Purchases/Disposal Of Assets
6. Destruction Of A Major Production Plant Due To
7. Announcing/Commencing Of A Major Restructuring
8. Major Ordinary Share Transactions
9. Large Changes In Asset Prices Or Forex
10.Changes In Tax Rates
11.Entering Into Significant Commitments Or
12.Commencing Major Litigation
13.Issuance Of Bonds/Securities
14.Decline In Market Value Of Inventory
1. Obtaining An Understanding Of The Procedures That
Management Has Established To Ensure That The
Subsequent Events Are Identified.
2. Read Minutes Of The Meetings Of The Shareholders,
Board Of Directors And Audit Executive Committees
Held After The Year End.
3. Inquire About Matters Discussed At Meetings For Which
Minutes Are Yet To Be Available.
4. Peruse The Latest Available Interim Financial
Statements, Budgets, Cash Flow Forecast And Related
5. Inquire From The Company’s Lawyer Concerning
Litigation And Claims That Arise.
6. Inquire The Managemnent For Any Subsequent Events
Occurred Which Might Affect The Financial Statements.
a) Review the audit working paper.
b) Evaluate the audit results.
c) Ensure compliance with applicable approved accounting standards and statutory
d) Ensure proper disclosure with Schedule 9 to the Companies Act 1965 and applicable
approved accounting standard in Malaysia.
e) Ensure consistent application of accounting policies.
f) Ensure the appropriateness of accounting treatments.
g) Ensure compliance with the applicable disclosure required by Bursa Malaysia for
public listed company.
h) Review financial statement disclosures for consistency and reasonableness.
i) Ensure the disclosure are consistent with management assertions and fair.
j) Ensure proper completion of the relevant checklist and questionnaires pertaining to
Review for contingent
Review for subsequent events
Accumulate final evidence
Evaluate results and issue
Communication with audit
committee and management
a) The letter provides pending threatened litigation and
asserted or unasserted claims or assessments by the lawyer
b) The letter furnish information or comment about the progress
of each item listed.
c) The letter provides unlisted pending or threatened legal
actions or a statements that the clients involvement is
d) The letter inform the lawyer’s responsibility which is to inform
the management of legal matters requiring disclosure in the
financial statements and to respond directly to the auditor.
• Auditor is responsible for determining client has properly
identified, accounted for, and disclosed material
Sources of Evidence.
• Primary sources include management and client's legal
Additional sources include corporate minutes, contracts,
correspondence from government agencies, and bank
• Obtain sufficient appropriate audit evidence about the
appropriateness of management's use of the going concern
assumption in the preparation and presentation of FS.
Type From To Timing Method
Auditors Client Before
Client Auditors Before
Attorney Auditors Near date of
Client Auditors Date of
Type From To Timing Method
to audit report
After audit Oral or
Auditors Client After audit Oral or