Final answer:
A subsequent event is an occurrence that may affect the financial statements and is identified before the auditor's report release date, whereas a subsequently discovered fact is information that could alter the completed financial statements or audit report and is identified after the report release date.
Step-by-step explanation:
The difference between a subsequent event and a subsequently discovered fact relates to the timing and impact on financial statements during an audit. A subsequent event refers to an event that occurs between the end of fieldwork date and the report release date that may require the financial statements to be adjusted or disclosed. In contrast, a subsequently discovered fact is a piece of information that comes to light after the report release date that, had it been known at the time, might have caused the financial statements to be amended or the auditor's report to be different.
Option 3 from your question is the correct answer: A subsequent event is discovered before the report release date and a subsequently discovered fact is discovered after the report release date. Auditors have a responsibility to evaluate subsequent events up to the date that the auditor's report is issued and, if relevant and material, these events need to be either adjusted in the financial statements or disclosed. However, if a subsequently discovered fact comes to light after the auditor's report has been issued, auditors may have to take certain actions such as notifying the entity, the board of directors, and in some cases, the users of the financial statements, depending on the importance of the fact.