- 10 Marks
AAA – L3 – Q30 – Audit Evidence
Question
a) Examples of the possible type of information that might have come to the auditors’ attention that might indicate non-compliance with the Factories Act include:
(b) The auditors should consider the following, when evaluating the possible effect on the financial statements for non-compliance with the law
Answer
A) Physical observation of the flooding by the Senior Partners on their visit to the factory.
Tip-off from residents of the area, likely.
Investigation by a regulatory organisation or government department such as the Environmental Protection Agency (EPA).
Payment of fines or penalties, if any.
Adverse media comments, likely. B)
Going concern applicability
The potential financial consequences, such as fines, damages, penalties, litigation, threat of expropriation of assets and enforced discontinuation of operations.
Whether the potential financial consequences require disclosure like enforced discontinuation of operations.
Whether the potential financial consequences are so serious as to call into question the fair presentation given by the financial statements, or otherwise make the financial statements misleading.
Provisions to be made in the accounts and contingencies.
- Topic: Audit Evidence
- Uploader: Salamat Hamid