Required: For each of the above events, state the appropriate action (if any) that the auditor would require of the client. Give reasons.
OPSM Opticians Ltd is a producer of fashion eyewear. The audit report for the year ended 30 June 20X9 was signed on 5 August 20X9 and along with the financial report was mailed to shareholders on 10 August.
Consider the following independent events. Assume that each event is material.
I. On 5 July, OPSM Opticians entered into a new contract to supply eyewears to JDS, a new major department store. The contract was similar in nature to other contracts previously negotiated.
II. OPSM Opticians has invested significant funds in developing a new type of unbreakable sunglass lens. On 8 July, OPSM Opticians applied for a patent for the lens, only to discover that a competitor had lodged a similar application on 20 June. The granting of Trendy Accessories’ application is now in serious doubt.
III. Internal audit has uncovered a major fraud at one of OPSM Opticians branches. The fraud was perpetrated by two senior staff, acting in collusion over a number of years. The internal auditors released their report to management on 15 July, after a highly confidential investigation spanning several months.
IV. One of OPSM Opticians major customers, Leisure Pty Ltd, suffered a fire on 20 July. Since Leisure Pty Ltd was uninsured, it is unlikely that their
V. On 25 July, a well-known financial planner advised his clients not to invest in OPSM Opticians due to poor long-term growth prospects. The market price for OPSM Opticians shares subsequently declined by 40%.
Required:
For each of the above events, state the appropriate action (if any) that the auditor would require of the client. Give reasons.
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