PROBLEM 5 - Subsequent Events (6 marks total) You are conducting the financial report audit for Monster Ltd for the year ended 30 June 20x2. The auditor's report is signed on 15 August and the financial statements are issued on 2 September. Assume all events are material. Event #1: On 2 August, upon receiving the legal representation letter from the client's solicitors, you discover that there is a new lawsuit pending against Monster Ltd from an employee who severely injured themselves while at work on 9 July. The employee is claiming Monster's negligence of workplace health and safety led to the accident, but Monster Ltd is vigorously defending the claim. Event #2: On 6 August, upon reading the minutes of a recent board meeting, you discovered that on 28 June, a fire affecting one of Monster Ltd's warehouses occurred, resulting in significant damage to uninsured property, plant and equipment. Event #3: On 20 August, due to a catastrophic world event, a sudden crash in the USD/AUD exchange rate occurred, causing Monster Ltd's US financial investments to plummet in value. You are aware of the event because it's all over the news. REQUIRED: Use the above information to answer questions 11 to 12 below. Q11: For each of the above events, state whether the appropriate accounting treatment is adjustment, disclosure or no disclosure. (3 marks) Event #1: . . Event #2: . Event #3: Q12: For each of the three events listed above, explain your choice of accounting treatment. (3 marks) (Please enter your answer in column 2 of the template provided) 1 A B I III c? ! Explanation Event Number #1 #2 #3 PROBLEM 5 - Subsequent Events (6 marks total) You are conducting the financial report audit for Monster Ltd for the year ended 30 June 20x2. The auditor's report is signed on 15 August and the financial statements are issued on 2 September. Assume all events are material. Event #1: On 2 August, upon receiving the legal representation letter from the client's solicitors, you discover that there is a new lawsuit pending against Monster Ltd from an employee who severely injured themselves while at work on 9 July. The employee is claiming Monster's negligence of workplace health and safety led to the accident, but Monster Ltd is vigorously defending the claim. Event #2: On 6 August, upon reading the minutes of a recent board meeting, you discovered that on 28 June, a fire affecting one of Monster Ltd's warehouses occurred, resulting in significant damage to uninsured property, plant and equipment. Event #3: On 20 August, due to a catastrophic world event, a sudden crash in the USD/AUD exchange rate occurred, causing Monster Ltd's US financial investments to plummet in value. You are aware of the event because it's all over the news. REQUIRED: Use the above information to answer questions 11 to 12 below. Q11: For each of the above events, state whether the appropriate accounting treatment is adjustment, disclosure or no disclosure. (3 marks) Event #1: . . Event #2: . Event #3: Q12: For each of the three events listed above, explain your choice of accounting treatment. (3 marks) (Please enter your answer in column 2 of the template provided) 1 A B I III c? ! Explanation Event Number #1 #2 #3
