One of the Second Year Audit Clerks inspected the Board of Directors minutes ofmeetings and found that shares were issued during the current year. Shares wereissued to a high$-$ranking businessman Mr$.$ Thorp. These shares were issued freeto Mr$.$ Thorp as part of an empowerment BEE deal. This was necessary to ensurethat Craven does not forfeit its current BEE level $1$ status. Mr$.$ Thorp is reported to have received R$10$ million in shares in order to secure an enterprise and supplierdevelopment contract. The South African National Accreditation System found tha the share issue constituted a bribe and instructed Craven to reverse the illegalshare issue transaction. Management did not reverse the transaction and did notadjust the accounting records as they intended to object to this ruling. Cravenslegal representatives in the case are of the opinion that the ruling is final and thatan objection would not be successful.

Discuss the following:

$$ The consequences of the share issue

$$ Consideration of a material misstatement

$$ Any adjustments needed

$$ If management refuses to make adjustments to reserve the share issue and the implications on the audit opinion

$$ Consider a reportable irregularity

$$ What the auditor should do in terms of section $45$ of the Auditing Profession Act.