Consider each of the following independent and material situations. In each case:

• the financial report date of the companies is 30 June 2019;
• the field work for the companies was completed on 20 August 2019;
• the financial report and audit report were signed on 3 September 2019;
• the financial report and audit report were mailed to the members on 10 September 2019; and
• the annual general meeting of the companies is scheduled for or was held on 30 September 2019.

1. A draft investigative report commissioned by a government enquiry was leaked to the media on 25 August 2019. The report has questioned the continued need for a segment of your clients business. Accordingly, there is a significant uncertainty regarding the future necessity for one of the services offered by your client and its industry colleagues. There have been significant media attention and speculation on this issue.

2. You are an auditor of PPK Limited (PPK), a company specialising in industrial property development. On 10 August 2019, you become aware that a major overseas investor has informed the management of PPK of their intention to withdraw their investment in a proposed major development. Based on its discussions with the investor and previously pledged funds from them, PPK has incurred substantial costs in feasibility studies, structural engineering reports and architectural plans. A significant portion of these costs have been capitalised. The management is dependent on finding a new investor to be able to meet these expenses and to continue with the project.

3. You are an auditor of Rose Limited (ROSE), a manufacturing client. ROSE has plans to upgrade its manufacturing process and plans to finance this by a sale of property which is superfluous to its needs, situated next to its head office. The property has been subdivided for the purposes of the sale and placed on the market in June 2019. On 25 July, the state government approved a plan for the construction of an express freeway. The plan will result in the appropriation of a portion of the property owned by ROSE and subdivided for the purpose of sale. Construction of the freeway will begin in late 2019. No estimate of the compensation payment is available.

4. WDE limited (WDE) is a major public company involved in the property development industry. Prior to signing your audit report, you sought a letter of comfort from the companys bankers that the bank would continue to support the company by providing finance over the coming year. The bank agreed that it would continue to provide finance. It was your view that without such support the company had severe cash flow problems and the financial report would need to be modified with respect to a going concern assumption. On 4 September 2019, the companys bankers wrote to you advising that the company had breached its loan covenant with the bank in August 2019 and that the loan facility was now due and payable and would not be renewed.

Required:

1. For each of the events described above (i-iv), select the appropriate action from the list below, and justify your response.

1. Adjust the 30 June 2019 financial report.
2. Disclose the information in the notes to the 30 June 2019 financial report.
3. Request that the client recall the 30 June 2019 financial report for revision.
4. No action is required. (4*2.5 = 10 marks)

If no action is taken by management for each of the events described above (i-v), determine the most appropriate audit opinion to be issued.

siutation	appropriate action	justifications	appropriate audit opinion