6.22 Scarborough Hydraulics Ltd contracts with governments to carry out a variety of infrastructure projects including water treatment and desalination plants and other drainage works. It also acts as a contractor to maintain a range of government infrastructure assets. The contracts that it has with its government customers have very strict turnaround times to ensure that, in the event of problems, water services to the public are quickly brought back on-line. You have completed your audit of Scarborough Hydraulics and the following material events occurred: Scarborough holds a stock of high-value drainage components to allow them to be able to respond quickly to their customers needs. Due to the size and quantity of these items, they were stored in a large outdoor space on the outskirts of Sydney. Shortly after the year end a significant amount of this stock was stolen. The security at this site was inadequate and no record of the theft is available. Scarborough has a large manufacturing centre in Melbourne which provides prefabricated concrete for the companys infrastructure projects. The company policy is to include factories in the balance sheet at market value less accumulated depreciation. The Melbourne factory is included in the balance sheet based on a valuation carried out five years ago. The company has not engaged a valuer to revalue the property because the directors believe that market values have remained fairly level over the last five years, so the existing carrying value is not materially different from current value. During the year, Scarborough completed a contract to provide drains for a private construction company that was building 500 houses in a new suburb of Brisbane. Shortly before the year end, a downpour of rain saw the drainage system fail causing damage to the houses being built. The construction company is suing Scarborough for the costs of rectifying the damage. Scarborough have not provided for any possible payout because they expect their losses to be covered by a claim against one of their sub-contractors that supplied the faulty part that caused the failure. Required Discuss each of the above issues, state what effect each would have on the audit opinion and give reasons. 6.24 Temper Telecommunication Ltd is a listed public company that manufactures communication equipment. Last year the company engaged in a contract involving the engineering and infrastructure for a highly complex broadband network in Adelaide. The company has a 30 June year-end, and the statutory accounts are due to be signed one week after the board of directors meeting on 5 August 2020. During the course of the audit, you become aware that, due to complex negotiations with the Australian Government on broadband networks, and the likely change in government policies, the company was advised that the plan for the broadband network engineering project may be suspended until further notice. Temper Telecommunications had bought sophisticated equipment which was to be paid off through the life of the project over 3 years. It also commenced the architectural planning, employing two highly paid experts in broadband architecture. Temper Telecommunications is now experiencing growing cash flow difficulties (the project was meant to be able to save its business). It has recently applied for a significant increase to a borrowing facility that is already fully drawn. Management is adamant that the company will continue to be viable. If necessary, it claims it can resort to cutbacks in its other future capital expenditure program, seek additional off-balance-sheet financing and/or reschedule existing debt arrangements. Required (a) Discuss the reporting options open to an auditor when going concern issues arise. (b) Discuss the auditors report options in relation to Temper Telecommunications Ltd.