For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client BLQ Ltd ended on 31 December 2018. Your audit report was signed on 20 February 2019 and the financial statements were issued on 4 March 2019. Listed below are events that have taken place. (a) On 14 February 2019: You discovered that 30% of BLQ Ltd’s inventory is destroyed by a fire on 7 January 2019. (b) On 10 March 2019, you discovered that BLQ Ltd had settled a class action lawsuit for $2 million on 30 January 2019. The class action was initiated by discontent customers in December 2017 for faulty products. The legal cost was disclosed as a provision worth $500,000 on the balance sheet. Required: For each of the events above, explain 1) the auditor’s responsibilities, 2) the appropriate accounting treatments and 3) the impact on audit report
For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client BLQ Ltd ended on 31 December 2018. Your audit report was signed on 20 February 2019 and the financial statements were issued on 4 March 2019. Listed below are events that have taken place. (a) On 14 February 2019: You discovered that 30% of BLQ Ltd’s inventory is destroyed by a fire on 7 January 2019. (b) On 10 March 2019, you discovered that BLQ Ltd had settled a class action lawsuit for $2 million on 30 January 2019. The class action was initiated by discontent customers in December 2017 for faulty products. The legal cost was disclosed as a provision worth $500,000 on the balance sheet. Required: For each of the events above, explain 1) the auditor’s responsibilities, 2) the appropriate accounting treatments and 3) the impact on audit report
For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client BLQ Ltd ended on 31 December 2018. Your audit report was signed on 20 February 2019 and the financial statements were issued on 4 March 2019. Listed below are events that have taken place. (a) On 14 February 2019: You discovered that 30% of BLQ Ltd’s inventory is destroyed by a fire on 7 January 2019. (b) On 10 March 2019, you discovered that BLQ Ltd had settled a class action lawsuit for $2 million on 30 January 2019. The class action was initiated by discontent customers in December 2017 for faulty products. The legal cost was disclosed as a provision worth $500,000 on the balance sheet. Required: For each of the events above, explain 1) the auditor’s responsibilities, 2) the appropriate accounting treatments and 3) the impact on audit report
For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client BLQ Ltd ended on 31 December 2018. Your audit report was signed on 20 February 2019 and the financial statements were issued on 4 March 2019. Listed below are events that have taken place.
(a) On 14 February 2019: You discovered that 30% of BLQ Ltd’s inventory is destroyed by a fire on 7 January 2019.
(b) On 10 March 2019, you discovered that BLQ Ltd had settled a class action lawsuit for $2 million on 30 January 2019. The class action was initiated by discontent customers in December 2017 for faulty products. The legal cost was disclosed as a provision worth $500,000 on the balance sheet.
Required:
For each of the events above, explain 1) the auditor’s responsibilities, 2) the appropriate accounting treatments and 3) the impact on audit report.
Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
