, has included $4 million mineral leases in the financial statement, which are valued by the client using fair value methodologies. However, to be able to realise the value of the mineral lease balance, additional funding is required to successfully commercialise the mineral leases. It’s uncertain that the client is able to obtain this additional funding. The auditors believe that the information is adequately disclosed by the client in the footnote of the financial report. The carrying value of the mining lease represents 6% of reported net profit for the 2020 financial year, whereas the client’s mater
Analyse and explain how the following situation would affect the audit report for the financial year ended on 31 December 2020.
The client company, Explorer Ltd, has included $4 million mineral leases in the financial statement, which are valued by the client using fair value methodologies. However, to be able to realise the value of the mineral lease balance, additional funding is required to successfully commercialise the mineral leases. It’s uncertain that the client is able to obtain this additional funding. The auditors believe that the information is adequately disclosed by the client in the footnote of the financial report. The carrying value of the mining lease represents 6% of reported net profit for the 2020 financial year, whereas the client’s materiality is 5% of reported net profit.
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