Peter has developed a business of making ice-cream in the thriving town of Rainer since 2010. This business has relied on supplying high-quality, organic ice-cream to many of the supermarkets and cafes in Rainer and the surrounding suburbs. As the number of these customers has grown and as there has been a growth in demand for organic products generally, his business has expanded. The business operates out of a small warehouse in Rainer. In the past five years, Peter has considerably expanded his operations and is now supplying a couple of the major supermarket chains in Australia. The business is very profitable and the balance sheet is strong. During the growth period, the company actually bought a few cafs, which have so far performed well, and also provide a guaranteed customer base for his ice-cream.

Peter obtained a loan from ANZ Bank to assist in funding his expansion. This loan is secured over the company assets. The company recently purchased a much larger warehouse with the funds from the loan. They plan to move operations to that location in the next financial year. Peters personal contacts have been instrumental in the growth of the business.

Peter has decided though that it is time to do other things. He would like to sell the business and will depart as Chairman of the Board and Chief Executive Officer. The financial statements have been prepared by Corey, the Chief Financial Officer. Peter decides to approach a dozen potential investors to offer shares in his business and he gives them a copy of the latest set of financial statements prepared by Corey. The latest financial statement shows strong growth over the past five years and in particular the current years performance was very good resulting in a bonus to the Chief Financial Officer. A number of the senior people in the company were given shares by Peter (including Corey) and most of them are also considering selling out as well.

There was a recent press report in The Time newspaper that suggested that the milk used by Peters Ice-cream was produced from cattle in Neverland which live under terrible conditions. This breaches the rules of the fair-trade certification and the publicity is causing some of Peters customers to rethink their relationship with Peters Ice-cream.

REQUIRED

a. Identify four parties with an interest in Peters Ice-cream and outline what their interests, motivations and concerns would be. (12 marks)

b. Identify which main parties would want an audit of Peters Ice-cream and discuss why they would want an audit. (5 marks)

c. You have been appointed to audit the financial reports of Peters Ice-cream. On what items in the financial report would you be focusing your main attention to provide users with an opinion that the financial report represents a true and fair view of the economic performance of Peters Ice-cream. (3 marks)