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For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client, Fresh Food
For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client, Fresh Food Limited, ended on 31 December 2020. The audit report has been signed off by the audit partner on 20 March 2021, whereas the financial report was issued on 31 March 2021. Listed below are events that were discovered after the end of the financial year.
- On 22 March 2021, the auditor discovered a major customer of Fresh Food Limited filed for bankruptcy for insufficient working capital caused by COVID in the 2020 financial year, which means the $200,000 account receivable outstanding on the balance sheet could not be collected.
- On 2 April 2021, the auditor discovered from the news that Fresh Food Limited was sued by a group of consumers for severe food poisoning on 30 November 2020. The matter is not disclosed or reported on the financial report that ended on 31 December 2020.
- On 22 February 2021, the auditor discovered that the client has signed a new loan contract with Commonwealth Bank of Australia to borrow $2 million.
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