- 4 Marks
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
- The notification of a fine has taken place after the audit report has been signed. Audit procedures will include:
- Discuss the matter with the directors to determine their course of action.
- If the directors decide to amend the disclosure in the financial statements, the auditor should audit the amendment and then re-draft and re-date the audit report as appropriate.
- If the directors decide not to amend the disclosure in the financial statements, the auditor can consider other methods of contacting the members. For example, the auditor can speak at the upcoming general meeting to inform the members of the event.
- Resignation as the auditor seems inappropriate due to the proximity of the annual general meeting (AGM). Resignation would allow the auditor to ask the directors to convene an extraordinary general meeting, but this could not take place before the AGM, so the auditor should speak at the AGM instead. (4 marks)
- Tags: Audit Procedures, Environmental Legislation, IAS 10, ISA 560, Subsequent Events
- Level: Level 3
- Topic: Evaluation and review
- Series: APR 2022
- Uploader: Dotse