i) Environmental Issues Leading to Risk of Misstatements:

• Provisions: The need for provisions, such as site restoration costs, may arise due to environmental regulations, leading to potential misstatements if not properly accounted for.
• Contingent Liabilities: Pending legal actions related to environmental damage could result in significant contingent liabilities.
• Asset Valuation: Environmental concerns might lead to impairment of assets, such as inventory or non-current assets, that could be overvalued.
• Capital Expenditure: Costs related to cleaning up operations or meeting environmental standards may be misclassified between capital and revenue expenditure.
• Product Viability: Environmental issues could affect the long-term viability of the company’s products, raising going concern considerations.

ii) Recommended Actions and Audit Procedures:

• Obtain an understanding of the company’s operations and the specific environmental issues it faces.
• Assess whether there is a risk of material misstatement in the financial statements due to these environmental issues.
• Inquire of management about the systems and controls in place to identify, evaluate, and account for environmental matters.
• Review the control environment to determine if appropriate internal controls exist for addressing environmental issues.
• Obtain written representations from management regarding environmental matters and their impact on the financial statements.
• Seek corroborative evidence from environmental experts if necessary.
• Review minutes of meetings, documentation, and regulatory compliance reports to identify any significant environmental issues.
• Assess the adequacy of provisions and contingencies, ensuring they are correctly reported in the financial statements.
• Ensure that all assets are reviewed for impairment, and liabilities and contingencies are appropriately disclosed.
• Consider the impact of environmental issues on the company’s ability to continue as a going concern.