ACCA Audit and Assurance (F8) Practice Exam

What actions must be taken after an Auditor's Report is signed regarding subsequent events?

1. Perform no further checks

2. Discuss with management and determine if financial statements need amending

3. Immediately inform stakeholders without analysis

4. Prepare for the next audit cycle

The correct answer is: Discuss with management and determine if financial statements need amending

The correct answer is that the auditor must discuss with management to determine if the financial statements need amending after the Auditor's Report is signed. This is vital because subsequent events can significantly impact the financial statements and may need to be reflected if they provide additional information relevant to the financial position or performance of the entity. Once the auditor's report is signed, it is essential to assess whether any events that occurred after the reporting period but before the financial statements are issued require changes. This discussion with management allows for a thorough evaluation of the subsequent events and ensures that all relevant information is considered. If it is determined that these events lead to material adjustments, the financial statements must be amended to provide a true and fair view. Moreover, taking action without proper discussion and analysis, such as informing stakeholders immediately or ignoring further checks, could lead to misinformation being communicated or the omission of crucial details, which is detrimental to stakeholder trust and clarity in financial reporting. Therefore, assessing whether financial statements need amending is a responsible, systematic approach to ensuring that financial reporting remains accurate and reliable.