You are the audit manager of Empower Co and currently you are finalizing the audit of its financial statements for the year ended 31 December 2020. The financial statements of Empower Co show profit before tax (PBT) of $2,700,000 and total assets of $12,500,000. The final audit is due to commence shortly, and the following matters have been brought to your attention:

Explosion

An explosion occurred at one of the warehouses on 15 January 2021 and has resulted in some damage to inventory and machines. The directors of Empower Co have estimated that the value of damaged inventory and machines was $700,000. The directors do not wish to make any amendments or disclosures to the financial statements for the explosion.

Going concern

The directors of Empower Co have prepared the financial statement on the going concern basis, but the auditors have a significant level of concern regarding the use of the going concern basis and do not believe that the company is a going concern. The directors refuse to amend the financial statements.

Key management personnel

On 15 December, Empower Co provided a service to Mr. Jack who is a key member of the senior management team of the company. The total amount of the service was $50,000. The management agreed not to disclose the service in the notes to the financial statement since the amount was clearly immaterial.

Borrowing cost

Interest charges of $80,000 relating to a loan taken out during the year to finance the construction of a new manufacturing plant were included in finance charges recognized in profit for the year.

Required:

Discuss each of these issues and describe the impact on the audit report if the above issues remain unresolved.