Luciana Pty. Ltd. is a large proprietary company client of your practice, operating business to lease and sell caravans. You are reviewing the results of subsequent cash receipts. There are several receipts listed from customers that were considered doubtful at the end of the year (30 June). You are also reviewing evidence that shows that another customer owing a large balance at year-end was unexpectedly declared bankrupt on 13 July.

For the current financial reporting period, a new financial director of the client has convinced the Board of Directors, to change the method of determining the useful lives of the companys equipment and plant the most material asset on their balance sheet. The effect has been a material reduction of the depreciation expense and consequent impact on the net income (profit) for the period. In your professional opinion the change is not justified, however, you have been unable to convince those charged with governance. The change has been adequately disclosed in the annual report in accordance with AASB 108.

Required:

1. Recommend a course of actions that the auditor can take.

Provide supporting ASA(s) or other references