Question
You have now completed gathering the audit evidence for the audit of the general-purpose financial report of Sunway Waterpark for the year ended 30 June
You have now completed gathering the audit evidence for the audit of the general-purpose financial report of Sunway Waterpark for the year ended 30 June 2018. The financial report is currently showing a profit after tax of $50 million, current assets of $40 million, non-current assets of $240 million, current liabilities of $60 million and non-current liabilities of $150 million. The following situations which have come to your attention.
On 30 June 2018, Sunway Waterpark discovered that one of its theme rides had suffered severe rust damage. The ride was badly damaged and not repairable.As a result, the ride will need to be replaced. The ride cost $20 million to construct in 2008, with an estimated useful life of 20 years. The estimated cost of replacement as at 30 June 2018 is $32 million.
A bank loan of $20 million that is disclosed as a non-current liability on the statement of financial position is in fact due to be repaid in December 2018. No refinancing has been arranged. The management has acknowledged that the bank is unlikely to extend the loan facilities. You believe that this will certainly lead to going-concern issues, as Sunway Waterpark will not be able to continue to trade without this finance.
You have discussed your concerns regarding the above-mentioned situations with the directors. However, the directors have stated that the financial report and the annual report will not be changed under any circumstance. No other potential material misstatements have come to your attention.
Required
Based on the relevant information in Case 2, draft an auditor's report. The auditor's report should include:
Title
Addressee
Opinion
Basis for Opinion
Key Audit Matters (if any)
Other Information (if any)
Auditor's Signature & Date
Responsibilities of the Directors & Auditor's Responsibilities are not required in this draft auditor's report.
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