QUESTION 2 Card Co is a recycling company with a year end of 31 August 20X1. It has suffered a series of floods in the last year. The company manufactures recycled cardboard to order in its own premises. Card Co keeps raw board and finished goods of recycled board in its stores. It is now late November 20X1, nearly three months since Card Co's year end, and your annual audit is nearly complete. The following events have just come to your attention: (1) You arrived at the client this morning to discover that heavy rain overnight has flooded the stores and part of the factory. (2) The finance director has told you that the pay-out for an insurance claim in relation to a flood which occurred in June 20X1 has just been received. Details of the insurance claim were disclosed in the financial statements as a contingent asset. Required: a. In respect of this morning's flood State the additional audit procedures you will carry out. (4 marks) b. In respect of the insurance pay-out; State the impact on the financial statement. (5 marks) c. You are now told that the directors have not amended the financial statements in respect of either of these items. Your audit firm considers the effect of each of these to be material however, you are satisfied that there are no going concern issues arising from the two events. You are required to describe the impact on the auditor's report of the November flood and the insurance pay-out. (6 marks)