Your audit firm, Styles & Associates, is the auditor of Brook Ltd (Brook) for the year ended 30 June 2020. Brook is a large and diversified entity. The directors declaration and auditors report is to be signed on 31 July 2020, and the financial report and auditors report mailed to shareholders on 4

August 2020.

Consider each of the following independent and material situations.

1. On 25 June 2020, Brook entered into a contract to purchase iron ore from Explorer Minerals Ltd. The iron ore was shipped and title passed on 26 June 2020. At the time of entering into the contract, the mineral content of the ore was estimated to be 75 per cent, and the liability
2. calculated accordingly. However, when the shipment was received on 15 July 2020, the mineral content was found to be 85 per cent, resulting in the liability having been understated.

3. On 22 July 2020, Brook received notice that one of its customers was taking legal action in relation to a disputed warranty claim. The customer purchased the goods on 31 May 2020, and first informed Brook of problems with the goods on 28 June 2020.

4. During the financial year, Brooks management wrote down an investment in a synthetic fibre project based on its belief that regulatory approval that was essential to its marketability was unlikely to occur. However, on 28 July 2020, the regulatory approval was given.

5. On 30 September 2020, Brook settled a lawsuit with Rolling Hills Ltd for twice the liability accrued in the financial report.

REQUIRED

1. For each of the events described above, explain the appropriate action, if any, that Brook should undertake.

2. What additional information would you, as the auditor, obtain in relation to each of the events described above?