In $20$x$7,$ the SML Board authorised a $$2$ million loan to a healthcare company set up in Taiwan and operated by the daughter of SML$$s Board chairman.

The principal repayment date was set for March $20$y$0,$ but no interest rate was stipulated and interest has been not been charged or collected for the two years since disbursement of the funds.

In January $20$y$0,$ the Taiwanese healthcare company went into liquidation.

a$)$ Evaluate the significance of the loan to SML$$s financial statements for the year ending $31$ December $20$x$9$;;

b$)$ Explain the appropriate adjustments and$/$or disclosures that should be made in the $20$x$9$ financial statements.

c$)$ Subsequent event $-$field work and final review

Evaluate the procedures that EJS Associates should perform on this matter, during the fieldwork and completion review phases of the audit.

d$)$ Subsequent Event $$ Audit Report

Assess any information that should be provided in EJS$$s audit report in relation to the loan;

Discuss any potential effect on EJS$$s audit opinion on SML$$s $20$x$9$ financial statements.