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Question 13 25 Consider each of the following independent and material situations. In each case: . the balance date is 30 June 20X9 the financial

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Question 13 25 Consider each of the following independent and material situations. In each case: . the balance date is 30 June 20X9 the financial report and audit report were signed on 12 August 20X9 the financial report and audit report were mailed to the members on 20 August 20X9 a. The Research and Development (R&D) division of your client Neptune Limited had developed a new type of photocopy paper, and the directors believed that the new photocopy paper would double their sales volume. Further Limited capitalised the development cost relating to the new photocopy paper in its 30 June financial reports. However, on 8 July 209 the granting of the application for a patent is rejected because a competitor had registered June. b. Your client, Outback Mining Limited, owns a mineral exploration licence in Central Australia. At 30 June this licence was valued by an independent expert at $50,000,000. This valuation is reflected in the financial report. On & Au Limited received notice that a claim was being lodged under the Native Titles Act. If the claim is successful the exploration licence will be worthless. c. Your client, Gem Limited, made an out of court settlement on 1 August 20X9 of $300,000. The settlement related to a litigation case dating back 4 years. A provision of $150,000 was recorded in the 30 June 20X9 financial report d. You are the auditor of Turbo Limited, a professional services client. On 15 August 20X9, Turbo Limited settled and paid personal injury claim to a former employee as a result of the accident that occurred in March 20X9. The co previously recorded a liability for the claim. e. On 22 August 20X9, you discover that a debtor of your client, Galaxy Limited, was placed in liquidation on 16 August. The debtor owed $600,000 as at 30 June; a specific provision of $300,000 of this amount was made at this da preliminary information, the likely payout to client is zero. Required: i. Describe your obligations as the auditor to each of the above subsequent events ( 5 x 1 mark = 5 Marks) li. For each of the events described above, select the appropriate action from the list below and justify your response: (5 x 2 Marks = 10 Marks) a. Adjust the 30 June 20X9 financial report. b. Disclose the information in a note to the 30 June 20X9 financial report c. Request the client recall the 30 June 20X9 financial report for revision. d. No action is required iii. What additional information would you obtain in relation to each of the events described above? (5 x 2 Marks = 10 Marks)

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