Question
Your audit team is about to provide an audit for ABC Ltd. It overall materiality level for audit if 5% of its profit before tax
Your audit team is about to provide an audit for ABC Ltd. It overall materiality level for audit if 5% of its profit before tax of $15m (i.e. $750k)
You discover two issues:
- Impairment calculation in relation to the intangible asset is complex and expert review was needed. The subsequent review revealed a $600k understatement of expense
- One of ABC Ltd's debtors have gone into liquidation, and therefore its debt should be written off. The debt (to be written off) is valued at $200k
You inform these issues to the client, who disagrees with the results. They refuse to adjust both the impairment expense (for the understatement) and the accounts receivable balance (for the bad debt).
What opinions should you provide under IAS 700, 701, 705 and 706 (modified, unmodified opinion) or emphasis of matter and explain the reasons for forming your opinion.
What additional paragraphs are required in the audit reports?
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