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You are the audit partner on the audit of Silver Pokie Club. The Club has usual facilities such as poker machines, bars, and a bistro.
You are the audit partner on the audit of Silver Pokie Club. The Club has usual facilities such as poker machines, bars, and a bistro. The Club also operates an indoor heated pool and a restaurant.
The following dates are relevant to the current audit engagement:
- the balance date is 30 June 2021;
- the Directors' Declaration and the Audit Report were signed on 17 August 2021;
- the completed Financial Report accompanied by the signed Audit Report were mailed to the shareholders on 25 August 2021.
Consider each of the following independentand material situations:
- On 19 August 2021, the Finance Manager informed you that, on the previous day, a participant in one of the Club's Aerobic classes, Tanya Morrison, injured herself after slipping on the gym floor. Tanya is the spouse of one of the state's leading barristers. A preliminary letter has already been received from Mr. Morrison, stating that Tanya intends to take legal action to recover the cost of medical treatment, plus damages, from the Club.
- On 1 August 2021, the Board decided that the Club's restaurant will close permanently on 30 September 2021. Although relatively well patronised, the restaurant has been losing around $20,000 per month and the Board feels it can no longer justify keeping it open.
- On 26 August 2021, the General Manager informed you that, on 20 August 2021, the Board decided to sell land it was holding as a long-term investment. It seems that a very generous offer was made by an overseas buyer. The contract is due to be signed on 29 August 2021.
Required:
For each of the situations described above (i-iii), select the appropriate action from the list below, and justify your response.
- Adjust the 30 June 2021 Financial Report.
- Disclose the information in the Notes to the 30 June 2021 Financial Report.
- Request that the client recall the 30 June 2021 Financial Report for revision.
- No action is required
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