This is a question about issues in formulating audit reports

You are the auditor of Wolksvagonne (WV), an Australian company that manufactures motor vehicles and operates solely in South Australia. The balance date of WV is 30 June. In early 2014, the Australian Government introduced a number of initiatives in the car industry to encourage manufacturers in Australia to produce energy efficient and carbon neutral motor vehicles. These initiatives included a 150% tax deduction available to businesses for all money spent on research and development in relation to developing a car which could deliver acleanervehicle alternative. A further 50% deduction was available if the research resulted in the successful implementation of a fuel system that could result in a carbon neutral vehicle.

In early 2016, WV announced the successful development of their carbon neutral model "WV-200". Internal research undertaken by WV indicated that carbon emissions had been reduced by 64% and the model now represented the most fuel efficient andcleanestmotor vehicle on the market. The vehicle became available to the general public in July 2016. Sales for the model exceeded expectations and by the end of 2017, the WV-200 model represented 10% of the total new cars sold in Australia. For the year ending 30^thJune 2019, total sales of the WV-200 represented 18% of all new motor vehicles sold in Australia.

In July 2019, the Australian Government signed an agreement with WV for the WV-200 to become the official motor vehicle used by all members of parliament. This was seen by the Government as a signal and a show of confidence in the Australian manufacturing industry and their commitment to reducing carbon emissions. The deal represented 1,000 WV-200 to be manufactured for the Government representing income of $40,000,000 for WV for the year ending 30^thJune 2020. The share market reacted positively to this news with the share price for WV increasing from $2.60 per share to $4.20 per share.

On the 18^thof July 2019, the CEO of WV met with the Prime Minister of Australia and a contract was signed for the manufacture and delivery of the motor vehicles to the Government. The CEO also presented the Minister for the Environment a copy of the research and testing undertaken by WV to show that extensive testing had been undertaken and all measures had been taken internally by WV to ensure the integrity of the testing process undertaken by WV.

In late July 2019, a story appeared in the national newspaper,"The Australian"questioning the integrity of the testing undertaken by WV for the WV-200. The article indicated that independent testing undertaken by the newspaper contradicted the results published in the report prepared by WV and delivered to the Minister for the Environment on the 18^thof July. The article initiated an immediate investigation by the Environmental Protection Agency (EPA) which found that the majority of the results contained in the report prepared by WV were fraudulent and incorrect. The share market reacted immediately, with the share price for WV falling to $0.80 per share by the end of July 2019.

On the 3^rdof August, a class action was lodged by lawyers on behalf of customers of WV for $80 million. Customer concerns ranged from resale values of the vehicles, the impact of repairs on engines' longevity and environmental concerns.

An emergency board meeting was held by WV on the 1^stof August to discuss a strategy to deal with the fallout from the WV-200 incident. The board agreed that the incident occurred in July 2019 so there was no need to report anything in the financial reports (either by adjustment or disclosure) for the year ending 30^thof June 2019. This approach was formally communicated to the external auditors with the request that any concerns identified by the external auditors were to be communicated directly to the Board of Directors.

REQUIRED:

(a) Identify and discuss four (4) issues, auditing or otherwise, which the auditor will need to consider in the planning stage of the audit. You will need to provide a brief discussion for each of the issues identified including an explanation of how the issue impacts on the planning stage of the audit.

(b) For each of the issues identified above, identify the evidence you would collect to assess the nature and impact of the issues, before finalising your audit report for WV. (You need to be as specific as possible in your identification of the types of additional evidence required - general statements will not be accepted or accrue any marks).

(C) Given only the facts above (and with reference to appropriate auditing standards), discuss the type of audit report that should be issued for WV.