You are the Audit Manager on the audit client called, Wick and Way Limited $($WW$),$

with a $31$ August $2024$ financial year$-$end. WW is in the aviation industry and provides

flights to customers within South Africa. You are an Audit Manager at an audit firm

called TrustEdge Audit Solutions Incorporated $($TEAS$).$

The final materiality was set at R$9000000$ during WW$\text{'}$s audit.

Misstatements

The following misstatements were identified during the audit:

$1.$ During the cut$-$off test on a sample of supplier invoices recorded after year$-$end,

it was revealed that a number of supplier invoices were not correctly accrued

at year$-$end. These supplier invoices are related mainly to equipment in transit.

The equipment is not capital in nature as it relates to equipment and tools used

for aeroplane maintenance and repair purposes. The error in the sample of the

supplier invoices tested amounted to R$3500000.$

$2.$ The aeroplanes used for flights by WW are not owned but leased. During the

audit, it was noted that the right$-$of$-$use assets were not depreciated for the year

in the amount of R$12500000.$

In both instances, management refused to adjust the annual financial statements

$($AFS$)$ for the $2024$ financial year.

Key audit matters

Issue $1$:

During the audit, the auditors were of the opinion that the lease liability was

understated in the AFS of WW$.$ The auditors discussed with WW$$s Chief Financial

Officer $($CFO$),$ and the CFO agreed to adjust the AFS with the necessary journal

entries provided by you, the Audit Engagement Manager at TEAS.

$10$ HAUD$332-1-$Jul$-$Dec$2024-$FA$1-$TA$-$V$4-16072024$

Issue $2$:

In the audit report, a qualified opinion was provided based on a material misstatement

due to incomplete disclosure of the director's remuneration. The issue was discussed

with WW management, but they refused to make any adjustments requested by TEAS.

REQUIRED:

$3\mathrm{.}1$ Below the heading Misstatements, discuss, with reasons, the impact that each

misstatement will have on the audit opinion.

$(20$ marks$)$

$3\mathrm{.}2$ Below the heading Key audit matters, discuss whether or not the key audit

matter should be communicated in the audit report and provide reasons.

$(15$ marks