The announcement made by Deloitte on July 26 2016 that the 1MDB’s financial statements for 2013 and 2014 should no longer be relied upon come under what is known in auditing as a subsequent event. There are three kinds of subsequent events. This is of which type? What may you say when comparison is made between what both Deloitte and the 1MDB had actually done for that type of subsequent event (as described in the case above) and what supposed to be done as detailed out in ISA 560 for subsequent events?
Subsequent events refers to events between the financial report and audit report dates, and the fact that it is disclosed after the audit report date. This are; adjusting events and non- adjusting events; Adjusting events- an event that provides more information in a balance sheet date on any issues that already existed. Non-adjusting events are events that gives new information in a balance sheet date that did not exist before. The 1MDB’s financial statements for 2013 and 2014 were dismissed after a change of opinion on of 1MDB’s investment fair value through Brazen Sky Ltd in Bridge Global SPC. This was an adjusting event because the value of 1MDBs investment was questioned after the balance sheet date. According to ISA 560, the auditor should perform a procedure designed to obtain enough audit prove that all events up to the auditor report date disclosed in, or requires adjustment of the financial statements, have been identified.