Question
Background: COVID-19 has caused enormous disruption to the Australian and global economies. Most companies are operating under significantly different circumstances to those existing 12 months
Background:
COVID-19 has caused enormous disruption to the Australian and global economies. Most companies
are operating under significantly different circumstances to those existing 12 months ago. In
particular, the travel and tourism industry sector has been severely impacted.
The Australian Securities and Investments Commission (ASIC) requires corporate management to
prudently review the measurement and recognition of the elements of the financial statements for
the 30 June 2020 financial year, in response to emerging issues and changing circumstances that have impacted on businesses during the COVID-19 pandemic.
Required:
The Qantas Limited (Qantas) audit committee is meeting with the external auditors shortly. Assume
you are an accountant working for Qantas. The CEO has asked you to prepare a business report for
the company's audit committee which:
Evaluates, taking an agency theory lens:
- Whether Qantas management is likely to engage in "big bath accounting" via impairment of assets as a result of COVID-19, and
- Whether "big bath accounting" is aligned with shareholders' interest
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