Section B: Question 5. Explaining the Audit Report Allow about 18 minutes to answer this question Fisher & Paykel Healthcare Corporation Ltd (FPHC) is a New Zealand company that is listed on the New Zealand Exchange. It manufactures and sells healthcare products and services, specialising in respirators for hospitals and homecare. PWC is a large accountancy firm and is the auditor for FPHC Ltd. Its audit report is dated 26 May 2021 and applies to FPHC Ltd's financial statements for the year ended 31 March 2021. PWC gave a qualified opinion in its audit report with the key points as follows: INDEPENDENT AUDITOR'S REPORT To the Shareholders of Fisher & Paykel Healthcare Corporation Limited QUALIFIED OPINION In our opinion, except for the possible effect of the matter described in the Basis for qualified opinion section of our report the accompanying consolidated financial statements of Fisher & Paykel Healthcare Corporation Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 31 March 2021, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS). BASIS FOR QUALIFIED OPINION ... Due to the COVID-19 pandemic, certain of the Group's annual finished products inventory counts and materials cycle counts planned to be held on or close to 31 March 2020 did not occur. As a result, we did not observe the counting of certain physical inventories at 31 March 2020 and were unable to satisfy ourselves sufficiently by alternative means as to the quantities and condition of inventory held at that date.... Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners... Our firm carries other services for the Group in the areas of treasury related financial markets risk analysis and commentary, regulatory tax compliance procedures in Mexico, providing market survey data relating to executive remuneration levels and other assurance services in relation to constant currency disclosures.... OUR AUDIT APPROACH Overview Overall group materiality: $35.9 million, which represents 5% of profit before tax.... Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.... AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAS (NZ) and ISAs will always detect a material misstatement when it exists.... (Source: Fisher & Paykel Healthcare Corporation Ltd, 2021, Annual Report, Independent Auditor's Report, pages 132 to 135) Required: Imagine a friend is considering buying shares (or investing) in FPHC Ltd. The friend knows you are studying ACCT102 and has asked you to briefly explain PWC's audit report on FPHC Ltd, using plain or non-technical language. [Hint: Write no more than three (3) paragraphs. Use your own words - do NOT copy from lecture notes, from the textbook or from any other source.] Type your answers into the text box below (or type into a document and then copy and paste into the text box below-paste answer NOW before continuing) 10 MARKS Section B: Question 5. Explaining the Audit Report Allow about 18 minutes to answer this question Fisher & Paykel Healthcare Corporation Ltd (FPHC) is a New Zealand company that is listed on the New Zealand Exchange. It manufactures and sells healthcare products and services, specialising in respirators for hospitals and homecare. PWC is a large accountancy firm and is the auditor for FPHC Ltd. Its audit report is dated 26 May 2021 and applies to FPHC Ltd's financial statements for the year ended 31 March 2021. PWC gave a qualified opinion in its audit report with the key points as follows: INDEPENDENT AUDITOR'S REPORT To the Shareholders of Fisher & Paykel Healthcare Corporation Limited QUALIFIED OPINION In our opinion, except for the possible effect of the matter described in the Basis for qualified opinion section of our report the accompanying consolidated financial statements of Fisher & Paykel Healthcare Corporation Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 31 March 2021, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS). BASIS FOR QUALIFIED OPINION ... Due to the COVID-19 pandemic, certain of the Group's annual finished products inventory counts and materials cycle counts planned to be held on or close to 31 March 2020 did not occur. As a result, we did not observe the counting of certain physical inventories at 31 March 2020 and were unable to satisfy ourselves sufficiently by alternative means as to the quantities and condition of inventory held at that date.... Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners... Our firm carries other services for the Group in the areas of treasury related financial markets risk analysis and commentary, regulatory tax compliance procedures in Mexico, providing market survey data relating to executive remuneration levels and other assurance services in relation to constant currency disclosures.... OUR AUDIT APPROACH Overview Overall group materiality: $35.9 million, which represents 5% of profit before tax.... Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.... AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAS (NZ) and ISAs will always detect a material misstatement when it exists.... (Source: Fisher & Paykel Healthcare Corporation Ltd, 2021, Annual Report, Independent Auditor's Report, pages 132 to 135) Required: Imagine a friend is considering buying shares (or investing) in FPHC Ltd. The friend knows you are studying ACCT102 and has asked you to briefly explain PWC's audit report on FPHC Ltd, using plain or non-technical language. [Hint: Write no more than three (3) paragraphs. Use your own words - do NOT copy from lecture notes, from the textbook or from any other source.] Type your answers into the text box below (or type into a document and then copy and paste into the text box below-paste answer NOW before continuing) 10 MARKS