The audit work for subsequent events will normally be concerned with balance sheet values at and after the year-end. The following procedures will be carried out.
ii) Fixed Assets
1. Check for any sales or proposed sales after the year-end which may mean a write down to net realizable value at the year-end.
2. Consider obsolescence of fixed assets, for example plant used to make a discontinued line, which might only become apparent after the year-end.
1. Check post year-end selling price of major items of stock and compare to value in year-end accounts. Consider write-downs to net realizable value.
2. Consider the possible existence of obsolete, damaged or slow moving stock and the consequent value of any write down.
3. Perform a (limited) stock-take after the year-end if the existence of all stock is not known for certain.
1. Check sales ledger cash received after the year-end to determine realisability of debtors and highlight doubtful debts.
2. Take doubtful debts out of the provision and consider writing parts of the provision off for which no money has been received.
3. Review trade press and correspondence and consult the sales manager about any major customers who have become insolvent recently.
4. Check the issue of credit notes and return of goods after the year-end to determine the provision for credit notes required in the accounts.
v) Cash at bank
1. Check that outstanding items on the bank reconciliation have cleared promptly after the year-end (to spot teeming and lading and late payment to creditors).
2. Write back any stale cheques not cleared (over 6 months old).
3. Check all material payments and receipts around the year-end to check the completeness of both accruals and prepayments (including NI and PAYE sundry creditors).
vi) Trade Creditors
1. Check reconciling items on suppliers‘ statements have cleared promptly after the year-end.
2. If a creditors‘ circularisation has been carried out then verify balances by examining post year-end payments, in cases where there was no supplier‘s statement and no reply.
vii) Going concern problems and other matters
1. Check profit and cash flow forecasts for evidence of future liquidity.
2. Review management accounts and reports after the year-end.
3. Review board minutes after the year-end.
4. Request any information on subsequent events and going concern matters from the directors and check their information.
5. The directors should also state they have given all such information in the letter of representation.
viii) Non-adjusting events
Look in board minutes and cash book for any matters which are non-adjusting but which should be disclosed in the accounts, for example, major sales of fixed assets, accidental losses and issues of shares and debentures