You are auditing Stretford Pty Ltd (Stretford). Stretford is a large proprietary limited company. The directors of Stretford have determined the company is not a reporting entity. Stretford supplies hotels with cleaning materials. Like others in the hotel industry it has experienced very difficult trading conditions because of COVID-19 travel restrictions imposed by governments. Consequently, it made a small loss for the year ending June 30th 2020. The directors however, believe that while they expect the firm to return to profitability soon, it is prudent to include a Note in the Accounts to the effect that there is a significant uncertainty relating to going concern. You agree with the directors. Also during the 2019-2020 financial year, the directors changed their choice of inventory cost flow assumption. This too was disclosed in a Note to the Accounts, however, you believe that the change is not appropriate. The directors refused to return to the original cost flow assumption, stating, "we have told shareholders what we have done that is sufficient." REQUIRED: (i) State the audit opinion you would give and the reason for giving it. (4 MARKS) (ii) Identify any matters that you are required to include in a separate paragraph in your audit report and the title of the paragraph. (4 MARKS) (iii) State where in the report any matter identified in (ii) above is included (2 MARKS) You are auditing Stretford Pty Ltd (Stretford). Stretford is a large proprietary limited company. The directors of Stretford have determined the company is not a reporting entity. Stretford supplies hotels with cleaning materials. Like others in the hotel industry it has experienced very difficult trading conditions because of COVID-19 travel restrictions imposed by governments. Consequently, it made a small loss for the year ending June 30th 2020. The directors however, believe that while they expect the firm to return to profitability soon, it is prudent to include a Note in the Accounts to the effect that there is a significant uncertainty relating to going concern. You agree with the directors. Also during the 2019-2020 financial year, the directors changed their choice of inventory cost flow assumption. This too was disclosed in a Note to the Accounts, however, you believe that the change is not appropriate. The directors refused to return to the original cost flow assumption, stating, "we have told shareholders what we have done that is sufficient." REQUIRED: (i) State the audit opinion you would give and the reason for giving it. (4 MARKS) (ii) Identify any matters that you are required to include in a separate paragraph in your audit report and the title of the paragraph. (4 MARKS) (iii) State where in the report any matter identified in (ii) above is included (2 MARKS)
