QUESTION 3 SUBSEQUENT EVENT AND AUDIT OPINION

Part A Subsequent Event

You are an audit associate at QUTAS, a medium sized accounting firm. In your audit of Responsible Printing Ltd (RPL) for the year ended 30 June 2020. The auditors report is to be signed on 19 August 2020. You have collected audit evidence in the tests of control and substantive testing. The audit manager is now reviewing the audit results.

On 12 August, in the few days before sign-off, the following additional information comes to your attention.

With the expectation that the orders from customers will increase towards the end of the year, on 5 June 2020, RPL placed an order with KMQ, one of its Northern European suppliers.

The order was shipped on 14 June 2020. But due to an unexpected block of the Suez Canal, the ship was stuck around the Red Sea. On 30 June 2020, salvage experts were still unable to estimate when the ship could go through the Canal to continue the shipping or when the cargo could arrive and be unloaded. The value of the paper stock is not material to RPL.

You have no concerns other than those described, and going concern is not an issue.

Required

1. Identify whether the situation will require adjustment or disclosure in the 2020 financial report, or have no consequences, and
2. Provide justification for each of your answers to (a).