State the auditor's responsibilities in relation to facts that become known to the auditor after the date of the auditor's report but before the…

CA Intermediate · Auditing and Ethics · MTP · January 2026
State the auditor's responsibilities in relation to facts that become known to the auditor after the date of the auditor's report but before the date the financial statements are issued. The question should be answered in terms of steps the auditor is required to take when such facts may have led to an amendment in the auditor's report. OR CA Rohit is conducting the audit of Suman Exports Ltd. During the audit, he notices that certain sales invoices provided by the client contradict the dispatch records obtained from the warehouse. He also observes that the Managing Director gives evasive answers when asked about certain high-value cash expenses. Additionally, some documents submitted appear to have been altered, and certain transactions seem unusual compared to prior years. In this context, explain how CA Rohit should apply the concept of professional skepticism. What specific matters should he remain alert to while performing the audit?

Suggested Answer and Working Notes:

The auditor has no obligation to perform any audit procedures regarding the financial statements after the date of the auditor’s report. However, when, after the date of the auditor’s report but before the date the financial statements are issued, a fact becomes known to the auditor that, had it been known to the auditor at the date of the auditor’s report, may have caused the auditor to amend the auditor’s report, the auditor shall: (i) Discuss the matter with management and, where appropriate, those charged with governance. (ii) Determine whether the financial statements need amendment and, if so, (iii) Inquire how management intends to address the matter in the financial statements. OR Professional skepticism refers to an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence. In this situation, several observations such as contradictory sales invoices, altered documents, evasive responses, and unusual transactions indicate that Rohit must increase the level of skepticism. While exercising professional skepticism, an auditor must remain alert to the following: Audit evidence that contradicts other audit evidence obtained. (For example, dispatch records contradicting sales invoices.)Information that brings into question the reliability of documents and responses to inquiries used as audit evidence. (Such as altered documents or evasive explanations by management.)Conditions that may indicate possible fraud. (For example, unusual transactions and modifications in documents.)Circumstances that suggest the need for audit procedures in addition to those required by the SAs. (Given the inconsistencies, Rohit may need to perform additional procedures.) Thus, based on the circumstances, CA Rohit should maintain professional skepticism, perform additional verification, and critically evaluate all evidence before forming his audit opinion.

Topics: Completion and Review, Ethics and Terms of Audit Engagements

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