American Fuel & Supply Company
American Fuel & Supply Company Inc.
1. A major focus of the lawsuit Chevron Chemical filed against Touche Ross was the auditing profession’s rules regarding the “subsequent discovery of facts existing at the date of the auditor’s report”. Those rules distinguish between situations in which a client cooperates with the auditor in making all necessary disclosures and situations involving uncooperative clients. Briefly summarize the differing responsibilities that auditors have in those two sets of circumstances.
Answer:
International Standard of Auditing (ISA) Section 560 Subsequent Events paragraph 15 defined that “Subsequent discovery of facts existing at the date of the auditor’s report” is where the condition when after the financial statements have been issued, the auditor becomes aware of a fact which existed at the date of the auditor’s report and which if known at that date, may have caused the auditor to modify the auditor’s report, the auditor should consider whether the financial statements need revision, should discuss the matter with management, and should take the action appropriate in the circumstances. The subsequent discovery of facts requiring the recall or re-issuance of financial statements does not arise from business events occurring after the date of auditor’s report. While a number of situations may apply, the most common situation is where the previously financial statements contain material misstatements due to either unintentional or intentional actions by management.
When facts are encountered that may affect the auditor’s previously issued report, the auditor should consult with his/her attorney because legal implications may be involved and actions taken by the auditor may involve confidential client-auditor communications. The auditor should determine whether the facts are reliable and whether they existed at the date of the audit report. The auditor should discuss the matter with an appropriate level of management and request
1. A major focus of the lawsuit Chevron Chemical filed against Touche Ross was the auditing profession’s rules regarding the “subsequent discovery of facts existing at the date of the auditor’s report”. Those rules distinguish between situations in which a client cooperates with the auditor in making all necessary disclosures and situations involving uncooperative clients. Briefly summarize the differing responsibilities that auditors have in those two sets of circumstances.
Answer:
International Standard of Auditing (ISA) Section 560 Subsequent Events paragraph 15 defined that “Subsequent discovery of facts existing at the date of the auditor’s report” is where the condition when after the financial statements have been issued, the auditor becomes aware of a fact which existed at the date of the auditor’s report and which if known at that date, may have caused the auditor to modify the auditor’s report, the auditor should consider whether the financial statements need revision, should discuss the matter with management, and should take the action appropriate in the circumstances. The subsequent discovery of facts requiring the recall or re-issuance of financial statements does not arise from business events occurring after the date of auditor’s report. While a number of situations may apply, the most common situation is where the previously financial statements contain material misstatements due to either unintentional or intentional actions by management.
When facts are encountered that may affect the auditor’s previously issued report, the auditor should consult with his/her attorney because legal implications may be involved and actions taken by the auditor may involve confidential client-auditor communications. The auditor should determine whether the facts are reliable and whether they existed at the date of the audit report. The auditor should discuss the matter with an appropriate level of management and request
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