Standard on Auditing (SA) 560, Subsequent Events, deals with two things: events that occur 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 report is dated. The auditor's duty differs sharply between those two periods. Before the report date the auditor must actively look for subsequent events. After it, the auditor has no obligation to perform audit procedures, but must act if a relevant fact comes to light.
SA 560 applies to audits of financial statements for periods beginning on or after 1 April 2009 and is listed in ICAI's Standards on Auditing. Paragraph references below are to SA 560.
The four dates that decide the auditor's duty
Paragraph 5 defines the dates the whole standard turns on.
| Date | Meaning under SA 560 |
|---|---|
| Date of the financial statements | The end of the latest period covered by the financial statements, such as 31 March |
| Date of approval | The date on which those with recognised authority have asserted that they have taken responsibility for the financial statements |
| Date of the auditor's report | The date the auditor dates the report on the financial statements |
| Date the financial statements are issued | The date the auditor's report and audited financial statements are made available to third parties |
Adjusting and non-adjusting events
The accounting framework, AS 4 or Ind AS 10 depending on the entity, decides the treatment. Events that give evidence of conditions that existed at the balance sheet date require adjustment. Events that reflect conditions that arose after that date do not change the figures but may need disclosure. SA 560 requires the auditor to determine whether each identified event is appropriately reflected in the financial statements under that framework (paragraph 8).
Period 1: from the balance sheet date to the report date
Paragraphs 6 and 7 require the auditor to perform procedures designed to obtain sufficient appropriate audit evidence that all events in this period that require adjustment or disclosure have been identified. The procedures must include:
- obtaining an understanding of any procedures management has set up to identify subsequent events;
- inquiring of management and, where appropriate, those charged with governance whether any subsequent events have occurred that might affect the financial statements;
- reading the minutes of meetings of owners, management and those charged with governance held after the date of the financial statements, and inquiring about matters discussed at meetings for which minutes are not yet available;
- reading the entity's latest subsequent interim financial statements, if any.
Inquiry alone is not enough. Depending on the risks, the review usually also covers the recoverability of assets, revisions to estimates, the status of litigation and developments affecting going concern.
Paragraph 9 requires a written representation from management that all events after the date of the financial statements for which the framework requires adjustment or disclosure have been adjusted or disclosed.
Period 2: after the report date but before issue
Under paragraph 10, the auditor has no obligation to perform any audit procedures after the date of the auditor's report. But if a fact becomes known that, had it been known at the report date, might have caused the auditor to amend the report, the auditor must discuss it with management and, where appropriate, those charged with governance, determine whether the financial statements need amendment, and if so, inquire how management intends to address it.
If management amends the financial statements, the auditor carries out the necessary procedures on the amendment and provides a new auditor's report, dated not earlier than the date of approval of the amended financial statements (paragraph 11).
If management does not amend them when the auditor believes it should, paragraph 13 applies. Where the report has not yet been provided to the entity, the auditor modifies the opinion under SA 705 (Revised) and then provides the report. Where the report has already been provided, the auditor notifies management and those charged with governance not to issue the financial statements to third parties before the necessary amendments are made.
Period 3: after the financial statements are issued
Paragraphs 14 to 17 apply the same logic after issue. If a fact comes to the auditor's attention that, had it been known at the report date, might have caused the auditor to amend the report, the auditor discusses it with management and those charged with governance, determines whether amendment is needed, and inquires how management intends to address it.
If the financial statements are amended, the auditor performs the necessary procedures on the amendment and provides a new report. The new report includes an Emphasis of Matter or Other Matter paragraph referring to the note that explains the amendment and to the earlier report, and it is dated not earlier than the date of approval of the amended financial statements.
If management does not take the necessary steps, the auditor notifies those charged with governance and takes action to seek to prevent reliance on the original report.
A dated example with a 31 March year end
| Date | Event | What SA 560 requires |
|---|---|---|
| 31 March 2026 | Balance sheet date. Trade receivable from Customer X ₹2.4 crore | Start of the subsequent events window |
| April 2026 | ₹0.4 crore received from Customer X; ₹2.0 crore remains | Test receipts and ageing as part of Period 1 work |
| 12 May 2026 | Financial statements approved; auditor's report signed and dated | Period 1 procedures cover 42 days to this date; representation letter dated no later than 12 May |
| 15 May 2026 | Auditor learns Customer X has entered insolvency; correspondence shows it was in serious difficulty before 31 March | Period 2: discuss, decide on amendment, ask how management will respond |
| 18 May 2026 | Board approves amended financial statements | New report dated not earlier than 18 May, for example 19 May |
The evidence shows the customer's difficulty existed at the balance sheet date, so this is an adjusting event. If management estimates recovery of 25% of the ₹2.0 crore outstanding, expected recovery is ₹0.5 crore and an allowance of ₹1.5 crore is needed. If management refuses to amend and the report has already been handed over, the auditor must notify management and those charged with governance not to issue the financial statements to third parties, even if a lender presentation is planned for 20 May.
Contrast a fire on 10 April 2026 that destroys inventory costing ₹3 crore. The fire is a condition that arose after 31 March. The year-end inventory figure is not adjusted, but if the loss is material the event is disclosed, and the auditor considers whether it affects going concern.
A working checklist
- Fix the review window from the balance sheet date to the expected report date, and update it if signing slips.
- Document management's process for identifying subsequent events.
- Read all minutes after year end and ask about meetings without minutes.
- Read the latest interim financial information.
- Follow up open matters: litigation, doubtful receivables, estimates, covenant breaches.
- Make targeted inquiries, not a single general question.
- Evaluate the treatment of each event as adjusting or non-adjusting under the framework.
- Obtain the paragraph 9 representation, dated as near as practicable to, and not after, the report date.
Keep the correspondence, the assessment of conditions at the year end, communications with management, approval evidence for any amended statements, and a copy of the report version actually released. A representation letter does not override contrary evidence.
Updated on 27 September 2026: retitled, merged the separate SA 560 checklist into this page, added the paragraph-wise duties for the three periods, the paragraph 5 definitions and a dated worked example with computed figures, and linked SA 560.
