Question
Australian Based Question: While completing your audit work for the 30 June 2016 audit of Grape Ltd, you become aware of the following material matters:
Australian Based Question:
While completing your audit work for the 30 June 2016 audit of Grape Ltd, you become aware of the following material matters: a. On 5 July, Red Pty Ltd, a major customer of Grape Ltd, was placed into liquidation. As Red Pty Ltd had confirmed the balance due to Grape Ltd as at balance date, management of Grape Ltd has refused to write off or provide for the Red Pty Ltd account in the 30 June 2016 financial report. However, they are prepared to disclose this information as a note to the financial report. b. On 15 July 2016, Grape Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern Queensland. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. c. Grape Ltd has capitalised significant funds incurred in developing an improved new wine cap that allows the wine to continue to develop in the bottle. On 20 July 2016, Grape Ltd applied for a patent for the cap, only to discover that a competitor had lodged a similar application on 15 June. The granting of Grape Ltd.s patent application is now in serious doubt. Management does not believe any change to the financial report is required. d. The entire Victorian operations of the company are under investigation by the Australian Taxation Office (ATO) for alleged failure to pay the appropriate amount of PAYG tax. Your preliminary investigations reveal that the Tax Office has a strong case against the company. No mention of the dispute is made in the financial report. Required: For each independent situation, state the type of audit report that you should issue, and give reasons for your answer.
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