Audit and Assurance Practice Exam 2025 - Free Practice Questions and Study Guide

The main purpose of a subsequent events review in auditing is to assess post-balance sheet events and their impact on the financial statements. Subsequent events are significant occurrences that happen after the reporting period but before the financial statements are issued. These events can influence the accuracy of the financial statements and the auditor's opinion.

By reviewing these events, auditors can determine if any recognition or disclosure is necessary in the financial statements to ensure they reflect true and fair value as of the reporting date. This is critical because subsequent events can materially affect the company's financial position, results of operations, and cash flows.

For instance, if a major acquisition takes place after the reporting period, it may require disclosure or even adjustments to the financials, depending on its nature and timing. Thus, the subsequent events review helps maintain the integrity of the financial reporting process, aligning with the principle of providing the most current and relevant information to users of financial statements.