The American Institute of CPAs has released a technical practice aid outlining the accountants responsibilities for subsequent events in compilation and review engagements.
The publication provides guidance on an entitys responsibility to disclose the date through which subsequent events have been evaluated. Accountants who perform compilations must consider evidence or information that comes to their attention while performing compilation procedures concerning events occurring subsequent to the balance sheet date that could have a material impact on the financial statements.
Accountants performing review services must inquire of management as to the existence of subsequent events, in addition to evaluating evidence or information that comes to their attention while performing review procedures.
Despite the fact that an accountant performing review or compilation services has only a limited responsibility with regard to subsequent events under professional standards, there is an increased risk of malpractice lawsuits in the event that a company fails or incurs significant losses as a result of a subsequent event. Accountants should ensure that both their consideration of subsequent events and work paper documentation is adequate.
Click here to download the practice aid.
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