Environmental Legislation

AAA – April 2022 – L3 – Q3b – Evaluation and review

Explain the additional audit work required for a fine imposed by the Environmental Agency after the audit report was signed.

Question

Assume that the date is now 10 December 2020, the financial statements and the audit report have just been signed, and the Annual General Meeting is to take place on 10 January 2021. The Environmental Agency has issued a report on 28 December 2020 stating that Aseda is in breach of environmental legislation and a fine of GH¢800,000 will now be levied on the company. The amount is material to the financial statements.

Required: Explain the additional audit work the auditor should carry out in respect of this fine. (4 marks)

Answer

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Tags: Audit Procedures, Environmental Legislation, IAS 10, ISA 560, Subsequent Events
Level: Level 3

Topic: Evaluation and review
Series: APR 2022

AAA – April 2022 – L3 – Q3a Evaluation and review

Explain the reporting implications and auditors' responsibilities for events after the reporting period for Aseda Manufacturer Ltd.

Question

Aseda Manufacturer Ltd (Aseda) is one of the established businesses in the manufacturing sector. The company has received different awards over the past decade. Aseda’s year-end was 30 September 2020. The audit of Aseda is nearly complete, and the financial statements and the audit report are due to be signed in a few days. However, the following additional information on two material events has just been presented to the auditor on 3 December 2020.

Event 1:
This event occurred on 10 November 2020. Production at the Aluta factory was halted for one day when a truck carrying dye used in colouring the fabric on mattresses reversed into a metal pylon, crashing the vehicle and causing dye to spread across the factory premises and into a local river. The Environmental Protection Agency (EPA) of Ghana is currently considering whether the release of the dye was in breach of environmental legislation. The company’s insurers have not yet commented on the event.
Event 2:
This event occurred on 19 October 2020. The springs in a new type of mattress have been found to be defective, making the mattress unsafe for use. There have been no sales of this mattress as it was due to be marketed in the next few weeks. The company’s insurers estimate that inventory worth GH¢600,000 has been affected. The insurers also estimate that the mattresses are now only worth GH¢100,000. No claim can be made against the supplier of springs as this company is in liquidation with no prospect of any amounts being paid to third parties. The insurers will not pay Aseda for the fall in value of the inventory as the company was underinsured. All of this inventory was in the finished goods store at the end of the year and no movements of inventory have been recorded post year-end.

Required: a) For each of the two events above: i) Explain the reporting implication of the issues in accordance with IAS 10: Events after the Reporting Period. (4 marks)
ii) Explain the auditors’ responsibility and the audit procedures that should be carried out in accordance with ISA 560: Subsequent Events. (12 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Environmental Legislation, IAS 10, IAS 2, Inventory Valuation, ISA 560, Subsequent Events
Level: Level 3

Topic: Evaluation and review
Series: APR 2022

AAA – April 2022 – L3 – Q3b – Evaluation and review

Explain the additional audit work required for a fine imposed by the Environmental Agency after the audit report was signed.

Question

Required: Explain the additional audit work the auditor should carry out in respect of this fine. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Environmental Legislation, IAS 10, ISA 560, Subsequent Events
Level: Level 3

Topic: Evaluation and review
Series: APR 2022

AAA – April 2022 – L3 – Q3a Evaluation and review

Explain the reporting implications and auditors' responsibilities for events after the reporting period for Aseda Manufacturer Ltd.

Question

Event 1:
This event occurred on 10 November 2020. Production at the Aluta factory was halted for one day when a truck carrying dye used in colouring the fabric on mattresses reversed into a metal pylon, crashing the vehicle and causing dye to spread across the factory premises and into a local river. The Environmental Protection Agency (EPA) of Ghana is currently considering whether the release of the dye was in breach of environmental legislation. The company’s insurers have not yet commented on the event.
Event 2:
This event occurred on 19 October 2020. The springs in a new type of mattress have been found to be defective, making the mattress unsafe for use. There have been no sales of this mattress as it was due to be marketed in the next few weeks. The company’s insurers estimate that inventory worth GH¢600,000 has been affected. The insurers also estimate that the mattresses are now only worth GH¢100,000. No claim can be made against the supplier of springs as this company is in liquidation with no prospect of any amounts being paid to third parties. The insurers will not pay Aseda for the fall in value of the inventory as the company was underinsured. All of this inventory was in the finished goods store at the end of the year and no movements of inventory have been recorded post year-end.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Environmental Legislation, IAS 10, IAS 2, Inventory Valuation, ISA 560, Subsequent Events
Level: Level 3

Topic: Evaluation and review
Series: APR 2022

Question Tag: Environmental Legislation

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AAA – April 2022 – L3 – Q3b – Evaluation and review

Explain the additional audit work required for a fine imposed by the Environmental Agency after the audit report was signed.

AAA – April 2022 – L3 – Q3a Evaluation and review

Explain the reporting implications and auditors' responsibilities for events after the reporting period for Aseda Manufacturer Ltd.

AAA – April 2022 – L3 – Q3b – Evaluation and review

Explain the additional audit work required for a fine imposed by the Environmental Agency after the audit report was signed.

AAA – April 2022 – L3 – Q3a Evaluation and review

Explain the reporting implications and auditors' responsibilities for events after the reporting period for Aseda Manufacturer Ltd.

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AAA – April 2022 – L3 – Q3b – Evaluation and review

Explain the additional audit work required for a fine imposed by the Environmental Agency after the audit report was signed.

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Explain the reporting implications and auditors' responsibilities for events after the reporting period for Aseda Manufacturer Ltd.

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AAA – April 2022 – L3 – Q3b – Evaluation and review

Explain the additional audit work required for a fine imposed by the Environmental Agency after the audit report was signed.

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AAA – April 2022 – L3 – Q3a Evaluation and review

Explain the reporting implications and auditors' responsibilities for events after the reporting period for Aseda Manufacturer Ltd.

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