The Role of Subsequent Event Evidence in the Audit

An Investigation of How Auditors Search for and Discover Subsequent Event Evidence, and Factors that Influence this Audit Task Diane Janvrin Assistant Professor djanvrin@iastate.eduPhone: 515-294-9450 Cynthia Jeffrey Associate Professor cjeffrey@iastate.eduPhone: 515-294-9427 Both at: 2230 Gerdin Business Building College of Business Iowa State University Ames, IA 50011-1350 Under review: Auditing: A Journal of Practice and Theory. Please do not quote without authors’ permission. 1Subsequent Events Evidence, Page of 46, Edit Date: 09/07/04 An Investigation of How Auditors Search for and Discover Subsequent Event Evidence, and Factors that Influence this Audit Task SUMMARY Subsequent events are events and/or transactions that occur after the balance sheet date but before the audit report is signed and dated. The evidence provided by these events may have a material effect on the financial statements, particularly on accounting estimates (AICPA 2004, AU 342.10; AICPA 2004, AU 560.05). The recent emphasis on more timely reporting and auditing has reduced and may eventually eliminate the time between balance sheet and report date, thus limiting the availability of subsequent event evidence (CICA 1999; Kogan et al. 1999; Elliott 2001; Greenstein and Vasarhelyi 2002; Jones and Xiao 2003). Decreased availability of subsequent event evidence may lower audit judgment quality (CICA ...