Final answer:
A subsequent event review is conducted after the financial statements' date but before they are issued, to identify events that might affect the statements' accuracy. This includes reviewing board minutes, recent financial data, and new commitments. Adjustments or disclosures in the financial statements may be necessary to reflect these events.
Step-by-step explanation:
A subsequent event review is ordinarily performed after the date of the financial statements but before they are issued or made available to users. The purpose is to identify events that may require adjustment to or disclosure in the financial statements. Subsequent events can be classified into two categories: recognisable (those that provide evidence of conditions that existed at the date of the balance sheet) and non-recognisable (events that provide evidence of conditions that arose after the balance sheet date).
During a subsequent event review, auditors and accountants look for any significant events or transactions that occur after the financial statements' date but prior to their issuance, which can materially affect the accuracy of the financial statements. For example, if a company is sued for a significant amount on February 1st, and the financial statements are dated December 31st of the previous year, this event should be evaluated for disclosure in the December financial statements.
A thorough review involves reading minutes from board of director meetings, analyzing latest financial performance, checking for new commitments, and potentially obtaining a management representation letter. Individuals responsible for the financial statements should be vigilant about subsequent events and, if necessary, adjust or disclose them to ensure the financial statements provide an accurate and fair view of the company's financial position and performance at the balance sheet date.