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A subsequent event is one that occurs after the date of the financial statements (i.e., December 31, 2013) but prior to the auditor having dated (or possibly issued) the audit report (i.e., March 15, 2014).
One type of subsequent event is where additional evidence becomes available before the statements have been issued that sheds light on certain estimates previously made in the statements.
A good example is additional evidence about the collectibility of a receivable that relates to its valuation in the December 31, 2013, financial statements but is not uncovered until January 31, 2014.
Why is it important from an auditing perspective that an auditor be required to adjust the financial statement amounts for some material subsequent events? If an auditor fails to live up to this standard, what is the potential liability exposure for the auditor?
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In the Siroka case involving the personality test that had questions relating to religion and sexual orientation, the company claimed that it had evidence of the test's validity for hiring store security officers.
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