Assume you are an auditor and you are facing the following separate and independent situations, the effects of all items below are material:

1. You are auditing a not for profit entity. You have discovered that the entity has not kept substantiating vouchers or receipts for more than 65% of its expenses, excluding salaries and allowances.

2. Big Event Ltd arranges for popular overseas entertainment artists to perform in Australia. The band Eclipse was booked by big event to play in major cities across the country. Big Events written contract required the company to pay the band in US dollars but, in order to reduce costs, it did not hedge the amounts. Subsequent to year end, the Australian dollar fell against the US dollar and a substantial loss relating to the band's tour was predicted.

The management of big event tried unsuccessfully to renegotiate the band's contract and has been unable to obtain finance to cover the expected shortfall. Big event has now cancelled the tour and expects a substantial claim from eclipse.

It is clear to you, as the auditor, that big event does not have the income, cash, other assets or insurance to sustain such a loss. Big event has currently prepared its financial report on a going concern basis.

3. You are the auditor of a consolidated entity, a significant component of their accounting records have been seized indefinitely by government authorities.

(5 marks)

4. Four weeks after the year-end date, a major customer of Price Construction Company Ltd went into liquidation. Because the customer has confirmed the balance due to Prince at the financial report date, management refuses to charge off the account or otherwise disclose the information. The receivable represents approximately 10% of accounts receivable and 20% of profit from ordinary activities. (5 marks)

Required:

Outline what the issue is and then describe the effect each of the above situations has on your auditors report if management were to refuse to make any changes you deem necessary.