You are the auditor of Maju Jaya Berhad in Malaysia. The following dates are relevant to the current audit engagement:

End of the reporting period 30 June 2018

Financial statement signed 15 August 2018

Auditors report signed 15 August 2018

Annual report mailed to members 22 August 2018

During your subsequent events review, you noted the following independent and material items.

Legal action has been taken against Maju Jaya Berhad for the last three years over a dispute of infringement of copyright. The lawyer of Maju Jaya Berhad advised that the company is likely to lose the case and a provision of compensation of RM1 million has been made in the account. On 25 August 2018, the court has a final decision that the defendant has to compensate the plaintiff for RM 2 million.

On 15 July 2018, the workers of Maju Jaya Berhad went on a strike to demand an increase in wages and employees benefits. The event appeared in the local newspaper. Disciplinary action has been taken against, David Chong, the leader of the group who organised the strike.

Government policy has been passed on 10 August 2018 to protect the local environment. The new policy will increase the existing provision of waste management by 40 percent. Currently, a provision of RM500,000 has been provided in the financial statements on 30 June 2018.

(d) A fraud investigation has been conducted against one of the directors Mr Guna Vallipan. A preliminary finding on 1 August 2018 revealed that Mr Guna has embezzled cash amount to RM2 million. A police report has been lodged against him and further investigation needs to be conducted to confirm such amount.

(e) One of the debtors of the company, Funland Bhd, has been experiencing financial difficulty in recent years. The company has been filed under PN17 on 30 August 2018. A provision has been made to write off 50 percent of the total debt of Funland Berhad in the financial statements of 2018.

Required

For each of the events described above, select the appropriate action from the list below and justify your respond:

A. Adjust the 30 June 2018 financial report.

B. Disclose the information in a note to the 30 June 2018financial report.

C. Request that the client recall the 30 June 2018 financial report for revision.

D. No action is required.

(10 marks)

What additional information would you obtain in relation to each of the events described above? You are required to provide at least ONE (1) audit procedure.

(10 marks)