Audit Question: ABC Limited is
Audit Question:
ABC Limited is a copper producer in Africa. You are the auditorof ABC and auditing it’s financial statements for the year ended 31December 2016. Subsequent to the year-end date, the compant wasfound to be in breach of an environmental regulation caused thewhole copper mine to shut down. ABC subjected to a significantamount of fines charged by the government. Because of the shuttingdown of the mine, ABC was unable to deliver the copper to itscustomers on time and is now facing potential litigation claimsfiled by its customers.
Please explain the responsibility of the auditor in twosituation, (a) subsequent events and (b) going concern, alsoprovide further audit procedures to response the aspects.
Answer:
Events may occur between the end of thereporting period and the date when financial statements areauthorized for issue which may present information that should beconsidered in the preparation of financial statements. Initiationof litigation against the company arising out of events thatoccurred after the reporting period does not indicate the existenceof liability at the reporting date and shall nottherefore trigger the recognition of liability in the financialstatements in accordance with IAS 37 Provisions, ContingentLiabilities and Contingent Assets. Thus Entity shallnot adjust the financial statements in respect ofthose events after the end of reporting period that reflectconditions that arose after the end of reportingperiod and only report about the litigation in their AnnualReport
As for Going Concern, auditor needs to consider facts like:
- Proposition of the copper produced in Africa in thier wholeproduction
- Another viable options to proceed production
- Liabilities in respect of African operations
- Legal obligations status
- Covenant conditions imposed by the lenders
"Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"
