AUDIT REPORT (5 marks)

Analyse and explain how the following situation would affect the audit report for the financial year ended on 31 December 2020, assuming you are the audit partner of Goles Ltd.

Goles Ltd is a large retailer in Australia. Goles financial report for the financial year ended 31 December 2020 shows a building at fair value of 22 million. However, the area has been contaminated by chemicals from a neighbouring property in July 2020. In addition, you become aware that Goles sold the property in January 2021 for $17 million. The materiality for the audit is $4.5 million. Goles refused to adjust the value of the building to $17 million for the financial year ended 31 December 2020.