Kit Kat Ltd is a company in the chemical industry, situated near the Murray River. Its year end is 30th June 2022 and you were engaged as the auditor on that date. The profit before taxation shown in the draft accounts to 30th June is $25,000,000.On 18th July 2022 the company’s premises situated close to the Murray River were flooded as the result of a freak storm. The company estimates that uninsured losses of $600,000 will arise ($400,000 stock loss and $200,000 damage to freehold property).With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation.

IAS 10 - Events After the Reporting Period provides the accounting and disclosure requirements…

Answered: Kit Kat Ltd is a company in the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Kit Kat Ltd is a company in the chemical industry, situated near the Murray River. Its year end is 30^th June 2022 and you were engaged as the auditor on that date. The profit before taxation shown in the draft accounts to 30th June is $25,000,000.

On 18^th July 2022 the company’s premises situated close to the Murray River were flooded as the result of a freak storm. The company estimates that uninsured losses of $600,000 will arise ($400,000 stock loss and $200,000 damage to freehold property).

With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation.

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