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Described below are situations which have arisen in three audit clients of your firm. The year end in each case is 30 September 2017. Vista

Described below are situations which have arisen in three audit clients of your firm. The year end in each case is 30 September 2017.

Vista plc

Vista plc, a supplier of retail display equipment, has included in its profit and loss account immediately below net profit after tax, an exceptional loss of OMR3.7 million on the sale of a trade investment. This accounting treatment is not in accordance with FRS3, Reporting financial performance, which requires the loss to be taken into account in arriving at the profit or loss on ordinary activities before taxation.

The pre-tax profit of Vista plc for the year ended 30 September 2017 is OMR694,000.

Expo Ltd

Expo Ltd exports a significant amount of its products and has a major distribution centre in an overseas country in which there has been a military coup. As a result of travel restrictions imposed by the military junta, it was not possible for your firm to attend the year-end stocktake. The stock at the overseas distribution centre at 30 September 2017 represented 75% of Expo Ltds stock.

Pharm plc

Pharm plc, a company engaged in the manufacture of pharmaceutical products, has extensive interests in an overseas country which requires pharmaceutical products to be registered. The regulatory situation in that country is undergoing considerable change and Pharm plc does not expect to obtain drug registration as quickly as originally anticipated. However, after carrying out the appropriate review, the directors have decided that Pharm plc has enough resources to continue for the next 12 months. Additional funding will be required from that point, and the directors believe that this can be achieved by a further issue of shares within the next 12 months.

The directors have included a note to the accounts explaining the situation.

REQUIRED

In respect of the situations outlined above, reach a conclusion on whether or not you would qualify each audit report. Give reasons for your conclusions and describe the potential effects on each audit report.

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