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You are the Audit Manager on the audit client called, Wick and Way Limited ( WW ) , with a 3 1 August 2 0
You are the Audit Manager on the audit client called, Wick and Way Limited WWwith a August financial yearend. WW is in the aviation industry and providesflights to customers within South Africa. You are an Audit Manager at an audit firmcalled TrustEdge Audit Solutions Incorporated TEASThe final materiality was set at R during WWs audit.MisstatementsThe following misstatements were identified during the audit: During the cutoff test on a sample of supplier invoices recorded after yearend,it was revealed that a number of supplier invoices were not correctly accruedat yearend. These supplier invoices are related mainly to equipment in transit.The equipment is not capital in nature as it relates to equipment and tools usedfor aeroplane maintenance and repair purposes. The error in the sample of thesupplier invoices tested amounted to R The aeroplanes used for flights by WW are not owned but leased. During theaudit, it was noted that the rightofuse assets were not depreciated for the yearin the amount of RIn both instances, management refused to adjust the annual financial statementsAFS for the financial year.Key audit mattersIssue :During the audit, the auditors were of the opinion that the lease liability wasunderstated in the AFS of WW The auditors discussed with WWs Chief FinancialOfficer CFO and the CFO agreed to adjust the AFS with the necessary journalentries provided by you, the Audit Engagement Manager at TEAS HAUDJulDecFATAVIssue :In the audit report, a qualified opinion was provided based on a material misstatementdue to incomplete disclosure of the director's remuneration. The issue was discussedwith WW management, but they refused to make any adjustments requested by TEAS.REQUIRED: Below the heading Misstatements, discuss, with reasons, the impact that eachmisstatement will have on the audit opinion. marks Below the heading Key audit matters, discuss whether or not the key auditmatter should be communicated in the audit report and provide reasons. marks
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