International Standard in Auditing 560(ISA560) Subsequent Events, stipulates that some subsequent events will result in adjusting the financial statements while are non-adjusting. Required Explain what makes some events, Adjusting while others Non adjusting items (4 marks) II) For each of the following items, assume that the partner is expressing an opinion on Lafarge financial statements for the year ended December 31, 2018; that he completed fieldwork on January 21, 2019; and that he now is preparing his opinion to accompany the financial statements. In each item, a subsequent event is described. This event was disclosed to the partner either in connection with his review of subsequent events or after the date on which the auditor has obtained sufficient appropriate audit evidence. Each of the five items is independent of the other. 1. A large account receivable from KCM (material to financial statement presentation) was considered fully collectible at December 31, 2018. However KCM has been put under liquidation so, it is unlikely that the account will be paid. 2. The tax court ruled in favour of the company on January 25, 2019. Litigation involved deductions claimed on the 2012 and 2013 tax returns. In accrued taxes payable, Lafarge had provided for the full amount of the potential disallowances. The Zambia Revenue Authority will not appeal the tax courts ruling. 3. Lafarges Manufacturing Division, whose assets constituted 45 percent of total assets at December 31, 2018, was sold on February 1, 2019. The new owner assumed the bonded indebtedness associated with this property. 4. On January 15, 2019, BDO, a major investment adviser, issued a negative report on Lafarges long-term prospects. The market price of Lafarges common stock subsequently declined by 40 percent. 5. At its January 5, 2019, meeting, Lafarges board of directors voted to increase substantially the advertising budget for the coming year and authorized a change in advertising agencies. Required Describe the effect, any of each of the following subsequent events will have on December, 31, 2018 financial statement further describe the audit tests that the auditor should do. (You may present the answers in the following format) (4 marks) Item Number Effect on the financial Statement Audit Test 1. 2. 3. 4 5.