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Your firm is the external auditor of Mifflin Ltd (Mifflin) for the year ended 31 December 2019. Dunder Ltd (Dunder), a customer of Mifflin, is
Your firm is the external auditor of Mifflin Ltd (Mifflin) for the year ended 31 December 2019. Dunder Ltd (Dunder), a customer of Mifflin, is suing Mifflin for breach of contract. Dunder claims that, during 2019, Mifflin supplied it with sub-standard materials and is seeking 265,000 from Mifflin for a refund of the cost of the products and compensation for loss of profits. Mifflin's directors are disputing the claim but have included a note to the financial statements detailing the issue and the amounts involved. The court case is not due to be resolved until after your firm has signed its audit report. Mifflin's legal team think it is likely that Dunder's claim will be successful and that Mifflin will have to pay 265,000 to Dunder. Mifflin's draft financial statements for the year ended 31 December 2019 indicate a profit before tax of 2.1 million and total assets of 17.5 million. Requirement: Discuss the implications for your firm's audit opinion on the financial statements of Mifflin. (6 marks)
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