AO pts You are an audit manager working at Falmer Auditors LLP and have just finished the audit fieldwork for your client, East Sussex Property Lid East Sussex Property Ltd has two core businesses, the first is the purchase of industrial property as an investment which is then let to business tenants. The second is the management of industrial properties for third party investor landlords. This involves finding tenants, collecting rents and providing maintenance services. The income for managing the third party properties is charged as a percentage of the rents due Net assets at the year end were 18.2m (2020 E16.9m) and turnover for the year was E250m (2020 E198m). At the planning stage of the audit for the year ended 31 October 2021 the following risk areas were identified, 1. Investment property- the investment property totals 12.4m and is valued at fair value and this year's valuation had to be undertake remotely meaning that some sites have not been visited by the independent valuer for several years II. Trade receivables-some tenants have been having trouble paying their rent on time and there is a significant amount of overdue receivables III. Going concern-the issue with receivables has raised doubt over the ability of the company to pay its debits as they fall due It is now January 2022, the audit fieldwork has been completed and you are preparing the audit file for partner review. You have iderthed the following outstanding issues, some of which have occurred since the year end, which you would like to bring to the attention of the partner, 1. The audit work on tenant receivables collected on behalf of third parties has concluded with a recommended increase to the bad debt provision of E1Am extrapolated from testing of a sample of receivable balances. Management do not accept that such a provision is necessary and have net made an adjustment The largest individual debt which you consider unlikely to be paid and for which a provision has not been made is 500 2. The valuation undertaken by the independent valuer has identified an investment property, a sawmill, that is currently overvalued by 250k Sussex Property Lad has not made an adjustment since they argue that the valuer has been over cautious in their valuation and has not been able to visit the site to see frsthand the Improvements that have been made during the current year which will ensure the tenant stays until the end of their lease in 7 years time 3. During a storm in December 2021 several of the investment properties were damaged and tenants have had to be relocated. The Insurance company has not accepted the claim submitted by East Sussex Property Ltd since loss of rental income is apparently limited to 25% of the rent foregone after a two month period Management have not made any adjustment to the financial statements, nor included any disclosure. Required: Your report should address the following: bunt of overdue recicles pany to pay its debts as they fall d Five occurred since the year end, which you would like to bring to the attention of the partner Eh completed and you are preparing the audit file for partner review. You have ideabed the following outstanding 1. The audit work on tenant receivables collected on behalf of third parties has concluded with a recommended increase to the bad debt provision of 1.4m extrapolated from testing of a sample of receivable balances, Management do not accept that such a provision is necessary and have not made an adynment The largest individual debt which you consider unlikely to be paid and for which a provision has not been made is 500 2. The valuation undertaken by the independent valuer has identified an investment property, a sawmill, that is currently overvalued by E250k Sussex Property Lad has not made an adjustment since they argue that the valuer has been over cautious in their valuation and has not been able to visit the site to sen frutand the Improvements that have been made during the current year which will ensure the tenant stays until the end of their lease in 7 years time 3. During a storm in December 2021 several of the investment properties were damaged and tenants have had to be relocated. The insurance company has not accepted the claim submitted by East Sussex Property Ltd since loss of rental income is apparently limited to 25% of the rent foregone after a two month period Management have not made any adjustment to the financial statements, nor included any disclosure Required: Your report should address the following 1. Explain the steps that the reviewing partner should undertake as part of the final review analying the purpose of each step (10 Mark 2. Analyse the impact of each of the outstanding issues, provide examples of additional audit evidence that may be sought and conclude on whether you feel any adjustments should be made to the financial statements in respect of each item. 3. Analyse the options available to the auditor if the client and the auditor cannot reach agreement on these matters 10 Mark