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ICAI released Auditing Guidance on Subsequent Events – Key Audit Considerations

ICAI Auditing Guidance on “Subsequent Event

An Auditing Guidance on “Subsequent Events – Key Audit Considerations amid COVID-19” for the benefit of the members has been released by the Institute of Chartered Accountants of India (ICAI). This auditing guidance is a combination of an advisory and some guidelines for financial statement auditors and preparers.

The Auditing Guidance highlights the area that needs some attention due to the lockdowns caused by COVID-19 Pandemic. The pandemic also affected the subsequent events occurring in between the financial statements date and auditor’s report date and effect on such entity’s financial statements (if any).

After it the released the guidance also shed light on auditor’s responsibilities related to gathering appropriate audit evidence about subsequent events impacted by this pandemic with some examples of events that may be affected by or caused due to this pandemic period.

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Atul Kumar Gupta, ICAI President, in an official statement said that “The advisory for auditors is to carefully evaluate circumstances prevailing in their audits and assess risk accordingly when applying the concepts given in the Advisory in their audits,”.

The released guidance also clarified that the guidance note does not modify/ amend or override

Standards on Auditing (SAs) 560 that determine the auditor’s responsibilities in relation to subsequent events.

The guidelines also have some of the Important features which state “The auditor have to pay special attention to scenarios such as valuation of inventory on a date other than the date of the financial statements, an audit of consolidated financial statements where the Components or component auditors are located in severely affected places, after the date of reporting of subsequent events or incidents, related and so on”.

In addition, The auditors also have a public interest obligation to continue and furnish audit work as per professional standards and ethical requirement and even in this pandemic situation. Hence, they must have to identify the specific aspect required that need to be reported to shed light on the problems, challenges and uncertainties that are being arisen by the COVID-19 Pandemic Situation.

The issued Auditing Guidance also listed the area that needs to be considered during this pandemic includes impairment of Non-Financial Assets such as PPE, Presentation of Financial Statements, leases, revenue, Provisions,  inventory Measurement, goodwill and Intangibles, Contingent Liabilities, and Contingent Assets, modifications or Termination of Contracts or Arrangements,  Financial Instruments, Consolidated Financial Statements, Going Concern Assessment, Income Taxes, Plant and Equipment, Borrowing Costs, Post Balance Sheet Events, Property and Interim Financial Reporting.

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