Question 4 (9 marks)

You are the audit partner on the audit of Silver Pokie Club. The Club has usual facilities such as poker machines, bars, and a bistro. The Club also operates an indoor heated pool and a restaurant.

The following dates are relevant to the current audit engagement:

• the balance date is 30 June 2021;
• the Directors' Declaration and the Audit Report were signed on 17 August 2021;
• the completed Financial Report accompanied by the signed Audit Report were mailed to the shareholders on 25 August 2021.

Consider each of the following independentand material situations:

1. On 19 August 2021, the Finance Manager informed you that, on the previous day, a participant in one of the Club's Aerobic classes, Tanya Morrison, injured herself after slipping on the gym floor. Tanya is the spouse of one of the state's leading barristers. A preliminary letter has already been received from Mr. Morrison, stating that Tanya intends to take legal action to recover the cost of medical treatment, plus damages, from the Club.

1. On 1 August 2021, the Board decided that the Club's restaurant will close permanently on 30 September 2021. Although relatively well patronised, the restaurant has been losing around $20,000 per month and the Board feels it can no longer justify keeping it open.

1. On 26 August 2021, the General Manager informed you that, on 20 August 2021, the Board decided to sell land it was holding as a long-term investment. It seems that a very generous offer was made by an overseas buyer. The contract is due to be signed on 29 August 2021.

Required:

For each of the situations described above (i-iii), select the appropriate action from the list below, and justify your response.

1. Adjust the 30 June 2021 Financial Report.
2. Disclose the information in the Notes to the 30 June 2021 Financial Report.
3. Request that the client recall the 30 June 2021 Financial Report for revision.
4. No action is required. (3*3= 9 marks)