You are auditor for Grapevine Australia Ltd (Grapevine), a wine production and distribution company, for the year ended 30 June 2019. Your auditors report was signed 24 August 2019. The financial report was approved on the same day by the directors of Grapevine. The financial report was issued to shareholders on 10 September 2019. The following material events occurred or became known to you from 30 June 2019 onwards. Assume each event is material.

Required:

For each of the following independent and material situations, select the appropriate action from the list below and justify your response:

1. Adjust the 30 June 2019 financial statements
2. Disclose the information in a note to the 30 June 2019 financial report
3. Request that the client recall the 30 June 2019 financial report for revision
4. No action is required

1. On 21 July 2019, a massive dust storm ruined the entire wine grape harvest. The loss was only partly insured. (3 marks)

[Answer here]

2. On 25 September 2019, management informed you that a lawsuit that commenced on 1 August 2018 and which was noted as a contingency in the 30 June 2019 financial report was ruled by court on 15 August 2019. The damages are four times higher than estimated on 30 June 2019. (3 marks)

[Answer here]

3. On 25 September 2019, management informed you that a lawsuit that commenced on 1 August 2018 and which was noted as a contingency in the 30 June 2019 financial report was ruled by court on 27 August 2019. The damages are slightly higher than estimated on 30 June 2019. (3 marks)

[Answer here]