（2007）An Investigation of Auditor Perceptions about Subsequent Events and Factors That Influence This Audit Task.pdfVIP

Accounting Horizons Vol. 21, No. 3 September 2007 pp. 295–312 An Investigation of Auditor Perceptions about Subsequent Events and Factors That Influence This Audit Task Diane J. Janvrin and Cynthia G. Jeffrey SYNOPSIS: Events that occur after the balance sheet date but before the audit report is signed and dated (subsequent events) may have a material effect on the financial statements and their users. New SEC reporting requirements reduce the time between the balance sheet and report dates, limiting the availability of subsequent event evi- dence. Professional groups, including the Canadian Institute of Chartered Accountants (CICA) and the American Institute of Certified Public Accountants (AICPA), question whether sufficient evidence will exist if subsequent event information is not available. They fear that decreased availability of subsequent event evidence may lower the qual- ity of both audit judgments and financial reporting. Scant prior research examines auditors’ perceptions about subsequent events. Our study examines how auditors search for and discover subsequent event evidence and factors that influence this process. Responses from auditors representing all Big 4 firms and one national firm suggest that subsequent event evidence is important. Auditors generally follow procedures recommended by audit standards; however, rec- ommended procedures uncover subsequent event evidence with low frequency. Im- plications for future research are discussed. Keywords: subsequent event; evidence evaluation; auditor judgment; timely reporting. Data Availability: Data are available from the authors upon written request. INTRODUCTION vents and/or transactions that occur after the balance sheet date bu