Question

Assume that the global pandemic COVID-19 will cause a material impact to your audit client. What additional audit procedures and disclosures are required in your audit planning and audit opinion.

This is what I've done so far for this question. I need help on Q3.

1. Explain the impact of Covid 19 to your audit client. (negative or positive)

In the current environment the consistency of financial reporting and associated disclosures is more critical than ever. The COVID-19 pandemic has already impact around the globe has put tremendous pressure on the dairy industry (Dairy Australia 2020). And on top of that locked down has declined the demand of the dairy products around the world which have disturbed the socioeconomic condition of the dairy owner and weakened their economy.

The impact of COVID 19 to the Bioxyne Limited is particularly disruptive for the direct sales, member meetings, product demonstrations and logistics in getting product to consumers. Bioxyne Limited has taken steps to mitigate the effect by shifted the direct sales to virtual meetings and enhanced the online presence to compensate by speed up the resumption of regular sales.

On the positive aspect, Bioxyne Limited product are pay significant attention on general health and immune support, more important for all in a pandemic. Company has succeeded in research and development project during the year to incorporate the companys proprietary strain of probiotics into its colostrum and fortified milk formula for nutrition and immune support to further improved the product portfolio. In addition, this new technology will create opportunities and enable Bioxyne to enhance general health and immune support.

2. Explain the additional procedures in your audit planning, the new audit procedures that you did not do in 2019 audit, but you plan to do in 2020 audit because of COVID 19.

Audit planning is the phase in which can best influence audit results. It is a key however too easily overlooked component of the audit process. It is something the needs to be emphasized and institutionalized into a habit. This habit ultimately leads to audit success.

Upon researching and looking at the half year financial report has discovered:

• Revenue for the year ended 30 June 2020 was $2,259,264. The primary revenue stream is sale of goods.
• The net loss after tax for the year was $593,095 (2019: loss $1,265,882)
• Expenses for the year were $1,948,772 (2019: $2,615,340) and included an impairment of intangible assets of $212,462.
• On the financial front, given the slowdown from COVID-19 to write down goodwill and product and development costs in the amount of $212,000.
• And prior to this write down and depreciation there is a recorded a declined loss of $300,000 with a reduction in costs YOY.
• Also, the cash YOY has been maintained at $1.7m recording positive operating cash flow for the year of $50,000.

Additional procedures that should implement in audit planning:

• Obtained a detailed understanding of each revenue streams and the process of calculating and recording revenue under AASB 15,
• Performing tests of detail on each revenue stream basis to test the occurrence and valuation of revenue,
• Assessing whether the Groups revenue recognition policies were in compliance with Australian Accounting Standard,
• Performing specific targeted cut-off testing over transactions recorded either side of the period end, to make sure that revenue recorded in the appropriate period.
• Focus on calculating the material impact of the COVID-19 that impact on the clients going concern and any change in the principal risk.
• Review audit file to ensure that sufficient appropriate audit evidence has been collected in respect of the matter.
• Ensure that managements disclosures appropriately describe the companys prospects and how financial statements users might be affected given the high degree of uncertainty.
• Review the accounts that are subject to estimation, expected loss assessments and hedge accounting.

3. Explain after performing the additional audit procedures, what additional disclosures should include in you audit opinion and your justification (why is it necessary to have these additional disclosures).

Additional disclosures should include in an auditor opinion