You are the supervisor on the audit of Golden Pokie Club, a large suburban club in New South Wales.

As well as the usual club facilities such as poker machines, bars and a bistro, the club also operates a large gymnasium, an indoor heated pool and a restaurant.

The following dates are relevant to the current audit engagement:

You are aware that the following independent and material events have occurred.
1. On 5 August 2015, the financial controller informed you that the board has recently received a letter from the assistant general manager, Mr T. The letter contains a confession: Mr T has been lodging fraudulent expense claims over the past 5 years, amounting to some \($40,000\). The financial controller's preliminary estimates indicate that this figure is materially correct; however, he believes it will take at least another 2 months before the exact figure is known. The police have been informed of the fraud and are searching for Mr T, who appears to have left the country.
2. On 8 July 2015, the federal government announced that it intends to introduce legislation sometime in September removing the current tax concessions enjoyed by clubs such as Golden Pokie Club. The changes will result in Golden Pokie Club being subject to the same tax rules that apply to companies. At present, the tax laws are such that Golden Pokie Club pays taxes only on net income from non-members, which represents about 10% of total net income. The club's board of management, in conjunction with other clubs in the state, intends to lobby the government to reverse its decision. The board is confident the club's tax concessions will remain in place.
3. On 17 August 2015, the financial controller informed you that on the previous day a participant in one of the club's aerobics classes, Ms P, injured herself after slipping on the gym floor. Ms P is the spouse of one of the state's leading barristers. A preliminary letter has already been received from Mr P, stating that Ms P intends to take legal action to recover the cost of medical treatment, plus damages, from the club.
4. On 18 August 2015, the financial controller informed you that a serious fire occurred in one of the club's kitchens during the football celebrations. Although covered by insurance, the fire caused extensive damage to the bistro area and the adjacent bar. Both the bistro and bar are expected to remain unserviceable until at least mid-September, resulting in an expected fall in revenue of around 7%.
5. On 1 August 2015, you read the minutes of a board meeting held on 15 July 2015. The minutes note that merger discussions with the nearby bowling club are progressing smoothly and the matter will be put to a vote of members on 30 October 2015. Costs associated with putting the issue to a vote (currently not included in the 30 June 2015 financial statements) are approximately \($50,000\).
6. On 23 August 2015, the general manager informed you that on 18 August 2015 the board decided to sell land it was holding as a long-term investment. It seems that a very generous offer was made by an overseas buyer. The contract is due to be signed on 25 August 2015.
7. On 10 August 2015, the board signed a contract for the upgrade of the club's air conditioning system. The upgrade is necessary to ensure compliance with workers compensation regulations.
The first payment of \($100,000\) is due on 1 September 2015. Work will be completed (and the final contract payment made) by 30 June 2015.
8. On 31 July 2015, the board decided that the club's restaurant will close permanently on 31 September 2015. Although relatively well patronized, the restaurant has been losing around \($10,000\) per month and the board feels it can no longer justify keeping it open.

Required

a. Explain what further evidence you would seek in relation to each of these matters.

b. Describe the action, if any, you would recommend to management in relation to the accounting treatment of each of these items.

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End of the reporting period 30 June 2015 Financial statements signed 15 August 2015 Auditor's report signed 15 August 2015 Annual report mailed to members 22 August 2015