You are the audit manager on the audit of Golden Golf Club, a function centre and golf facility situated in Perth Western Australia. Your accounting firm has been the auditor of this business for the last 4 years. The business operates:

-A mini casino

-The golfing green and golf shop

-A member bar

-A small bistro/restaurant

-A gym

-A heated pool

The following dates are important for the current audit period:

Year end: 30 June 2021

Audit report signoff: 15 August 2021

Printing of annual report: 20 August 2021

Annual report mailed to shareholders: 22 August 2021

Final date that annual report can be made available to shareholders: 1 October 2021

(3 months post balance date)

The following events have occurred:

1) On 10 August 2021, it was reported in the newspaper that the CEO admitted to committing fraud and had stolen $400,000 over the past five years. You speak to the CFO and he verifies the claims saying the figure is likely to be correct and at least half of the amount relates to the current financial year. He also says that the police are looking for the previous CEO as he has disappeared, and it will be another month before the exact amount that has been stolen is known.

2) On 22 August 2021, the CFO told you that on the previous day one of the golf members, pro-golf payer Norman Greg, injured himself after falling though a patch on the golf green. The fall resulted in severe damage to his spinal cord. A preliminary email was received from Norman Greg stating his intentions to sue as his specialist believes he may never walk again. You ask the CFO about the current insurance policy and he tells you it was due last quarter and although the previous CEO claims it was paid, there is no record of the policy.

Required:

Utilising the template on LMS: BUS306 TMA 2021 Final Quiz Template 2 -

For each of the case facts above:

a) Discuss the evidence that you would gather as part of your audit completion (8 marks)

b) State the actions the auditor should take and recommend which audit opinion would be issued. Give complete reasons for all of your answers (12 marks)

Theory (answer independently, not related to any of the case fact

c) As part of substantive procedures, when dealing with risky clients such as those discussed in Question 1 and Question 2, the auditor often has to reassess their final materiality from that which was assigned at the planning stage of the audit. It makes sense then to increase final materiality consistent with the increase in audit risk. Discuss the correctness of this statement. (4 marks)

BusinessAccountingBUS 306