The following are independent situations (see table below) relating to the year ended 30 June 2020. Assume all entities are reporting entities and that all situations are material.'

Required:

For each situation:

(a)Describe one additional procedure you would perform prior to issuing your audit report.

[3 marks]

(b)Assuming the matters remain unsolved, recommend an audit opinion for each entity for the year ended 30 June 2020.

[3 marks]

(c)Justify the chosen audit opinion for each of the entity for the year ended 30 June 2020.

[6 marks]

[Total for Question 7: 12 marks]

Question 7 Answer

Scenario

Procedure

(1 mark)

Audit Opinion

(1 mark)

Justification

(2 marks)

General Ltd prepared its financial statement in accordance with generally accepted accounting standards except for one material issue. The director explained in a note that compliance with accounting standards would mislead users of the statements. You disagree but did not succeed in convincing the directors to agree with you.

You have received the draft annual report from Runners Galore Ltd. On reading the "Year in Review" you note the club chairman states that revenues increased by 150%. On checking the accuracy of this information, you note that revenues have actually fallen by 15%. The club refuses to change anything in the annual report as it will incur additional cost for printing.

The audit of Zed Ltd was extremely difficult this year as the client did not keep appropriate books and records. The accounting department was chronically understaffed, so transactions were not promptly entered and reconciliations not performed. A temporary accountant was employed to help sort out the mess but was unable even to reconcile the bank account at year- end. You are not satisfied that all transactions that occurred during the year are reflected in the financial report.