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Part-a For the first scenario state the type or audit report that you should issue and gibe reasons for your answer in 5 line

Part-a For the first scenario state the type or audit report that you should issue and gibe reasons for your answer in 5 line

FINANCIAL ACCOUNTING
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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Part-a For the first scenario state the type or audit report that you should issue and gibe reasons for your answer in 5 lines
Scenario: You are the audit partner at Preston & Associates and are responsible for the audits of the following four independent entities for the year ended 30 June 2020. A. The finance director of Rawson Pty Ltd, a manufactures men's clothing, informed you that the audit the company was closing one of its smaller production sites and as a result, a number of employees would be made redundant. A redundancy provision of $150,000 is included in the draft financial statements. A few months have now passed, and the audit team is performing the audit fieldwork including the audit procedures which you recommended over the redundancy provision. The team has calculated that the necessary provision should amount to $345,000. The finance director is not willing to adjust the draft financial statements. B. Due to losses and adverse key financial ratios, an auditor has substantial doubt about a client's ability to continue as a going concern for a reasonable period of time. The client has adequately disclosed its financial difficulties in a note to its financial report, which do not include any adjustments that might result from the outcome of this uncertainty. C. You are the auditor of a consolidated entity a significant component of whose accounting records have been seized indefinitely by government authorities. D. A note to the financial report of Orchard Ltd refers to an agreement to sell its major subsidiary. Barks Pty Ltd, to a rival food company. This agreement was finalised the day before the financial report was to be signed and the sale is to take place a month after the audit report is to be signed. You have verified this transaction. However, when reviewing the Chairman's Review, which is to be included in the annual report that contains the audited financial report, you see that: a. plans for expanding Barks Pty Ltd.'s facilities are outlined along with the additional revenue to be generated over the next ten years as a result of this expansion is tabulated: and there is no reference to the sale of Bark Pty Ltd.
Transcribed Image Text:Scenario: You are the audit partner at Preston & Associates and are responsible for the audits of the following four independent entities for the year ended 30 June 2020. A. The finance director of Rawson Pty Ltd, a manufactures men's clothing, informed you that the audit the company was closing one of its smaller production sites and as a result, a number of employees would be made redundant. A redundancy provision of $150,000 is included in the draft financial statements. A few months have now passed, and the audit team is performing the audit fieldwork including the audit procedures which you recommended over the redundancy provision. The team has calculated that the necessary provision should amount to $345,000. The finance director is not willing to adjust the draft financial statements. B. Due to losses and adverse key financial ratios, an auditor has substantial doubt about a client's ability to continue as a going concern for a reasonable period of time. The client has adequately disclosed its financial difficulties in a note to its financial report, which do not include any adjustments that might result from the outcome of this uncertainty. C. You are the auditor of a consolidated entity a significant component of whose accounting records have been seized indefinitely by government authorities. D. A note to the financial report of Orchard Ltd refers to an agreement to sell its major subsidiary. Barks Pty Ltd, to a rival food company. This agreement was finalised the day before the financial report was to be signed and the sale is to take place a month after the audit report is to be signed. You have verified this transaction. However, when reviewing the Chairman's Review, which is to be included in the annual report that contains the audited financial report, you see that: a. plans for expanding Barks Pty Ltd.'s facilities are outlined along with the additional revenue to be generated over the next ten years as a result of this expansion is tabulated: and there is no reference to the sale of Bark Pty Ltd.
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