variety of Pacific Islands, including the Solomon Islands, Vanuatu, Fiji, Papua New Guinea, Samoa, Tonga and Niue. The company believes it can expand some of its Australian factories. The company has had good success with this model as it has a ready workforce that is eager for work and there is a general perception that a job with an Australian company is more stable. The company also states that compared to Australia, labour costs are approximately 20 per cent cheaper. The company is now worried about the impact of climate change on its business model. Factories in Samoa and Papua New Guinea are starting to show damage from rising sea levels (estimated at 25\% damage), and two of their premises in Vanuatu and Fiji were damaged by a recent tropical storm (estimated at 15% ). Its premises in the Solomon Islands was also impacted by a recent earthquake (estimated at 50% ). Upon review of their asset portfolio, the company decides to recognise an impairment loss and in effect, the company decides to take a significant one-off financial hit by writing off almost all of the asset value as an impairment. Rather than seeking to relocate the manufacturing equipment from the Pacific Islands to Australia, the company seeks to write much of that value off as an impairment loss selling only in the local market. The company believes that the climate change impacts qualify as a case for impairment under their impairment policy and under AASB 136. As the company is reporting a significant impairment loss for this financial period, this puts you on notice as the auditor. The company sought the expertise of an external valuer to support the determination of fair value in calculating the recoverable amounts for their assets. This is in accordance with the company's impairment policy. All the valuations are carefully documented for your benefit. The valuer makes a couple of assumptions, including that the manufacturing equipment only has value in the local markets where they are located and records that in the valuation. You are unsure about the two impairments claimed (totaling $31,300,000 ). These figures concern you for a couple of reasons: - You are unsure why all the factories are being impaired - You are unsure why they equipment, which is good working order, could not be relocated. That would cost some money (approximately a $1m ), but there is no no case made for why the equipment is impaired and why it can only be sold in local Pacific markets. Required: Evaluate the evidence you have obtained in relation to impairment. Identify any risks or 'red flags' in relation to the potential for material misstatement that you consider important in your role as an auditor. Suggest what actions you think you would need to undertake based on your evaluation. variety of Pacific Islands, including the Solomon Islands, Vanuatu, Fiji, Papua New Guinea, Samoa, Tonga and Niue. The company believes it can expand some of its Australian factories. The company has had good success with this model as it has a ready workforce that is eager for work and there is a general perception that a job with an Australian company is more stable. The company also states that compared to Australia, labour costs are approximately 20 per cent cheaper. The company is now worried about the impact of climate change on its business model. Factories in Samoa and Papua New Guinea are starting to show damage from rising sea levels (estimated at 25\% damage), and two of their premises in Vanuatu and Fiji were damaged by a recent tropical storm (estimated at 15% ). Its premises in the Solomon Islands was also impacted by a recent earthquake (estimated at 50% ). Upon review of their asset portfolio, the company decides to recognise an impairment loss and in effect, the company decides to take a significant one-off financial hit by writing off almost all of the asset value as an impairment. Rather than seeking to relocate the manufacturing equipment from the Pacific Islands to Australia, the company seeks to write much of that value off as an impairment loss selling only in the local market. The company believes that the climate change impacts qualify as a case for impairment under their impairment policy and under AASB 136. As the company is reporting a significant impairment loss for this financial period, this puts you on notice as the auditor. The company sought the expertise of an external valuer to support the determination of fair value in calculating the recoverable amounts for their assets. This is in accordance with the company's impairment policy. All the valuations are carefully documented for your benefit. The valuer makes a couple of assumptions, including that the manufacturing equipment only has value in the local markets where they are located and records that in the valuation. You are unsure about the two impairments claimed (totaling $31,300,000 ). These figures concern you for a couple of reasons: - You are unsure why all the factories are being impaired - You are unsure why they equipment, which is good working order, could not be relocated. That would cost some money (approximately a $1m ), but there is no no case made for why the equipment is impaired and why it can only be sold in local Pacific markets. Required: Evaluate the evidence you have obtained in relation to impairment. Identify any risks or 'red flags' in relation to the potential for material misstatement that you consider important in your role as an auditor. Suggest what actions you think you would need to undertake based on your evaluation