In a newspaper article of 3 May 2019 entitled ‘AMP facing $100m super class-action suit’ (in The Australian, by Ben Butler, p.20) it was reported that the law firm Slater & Gordon had unveiled plans to lodge a class action against financial services group AMP worth more than $100 million, and which was to be lodged on behalf of holders of superannuation funds who were allegedly charged excessive fees and provided with poor investment returns. According to the article, a representative of Slater &

Gordon said they had already identified more than 8000 potential members of the class action, but expected there would be tens of thousands of potential members.

According to the article, Slater & Gordon claim to have undertaken an extensive review of fees across the superannuation industry and found AMP’s fees for its ‘My Super’ product, which AMP claimed to be its low-cost option, were significantly higher than the rest of the industry.

Required:

a) Using PAT’s debt hypothesis argument, predict what action AMP managers may have taken towards disclosing the threat of a lawsuit by Slater & Gordon in the 2019 financial statements? 

b) Assume you are AMP’s auditor, would you advise AMP’s managers to disclose the information about the possible law suit? Why or why not? 

c) Assume it is disclosed, explain how the information should be disclosed in the 2019 financial statements. 

Answer rating: 100% (QA)

SOLUTION As per the scenario we understand that a lawsuit was entitled in a newspaper article on 3 M... View the full answer