You are the audit manager of Daffy & Co and you are briefing your team on the approach to adopt in undertaking the review and finalisation stage of the audit. In particular. your audit senior is unsure about the steps to take in relation to uncorrected misstatements.

During the audit of Minnie Co the following uncorrected misstatement has been noted.

l he property balance was revalued during the year by an independent expert valuer and an error was made in relation to the assumptions provided to the valuer.

The following additional issues have arisen during the course of the audit of Minnie Co. Profit before tax is $10m.

(i) calculated on the total of land and buildings. In previous years it has only been charged on buildings. Total depreciation is $2.5m and the element charged to land only is $0.7m. (4 marks)

(ii) Minnie Co's computerised wages program is backed up daily. however for a period of two months the wages records and the back-ups have been corrupted. and therefore cannot be accessed. Wages and salaries for these two months are Wm. (4 marks)

(iii) Minnie Co's main competitor has filed a lawsuit for $5m against them alleging a breach of copyright: this case is ongoing and will not be resolved prior to the audit report being signed. The matter is correctly disclosed as a contingent liability. (4 marks)

Required:

Discuss each of these issues and describe the impact on the audit report if the above issues remain unresolved.

Answer rating: 100% (QA)

i Depreciation on land and buildings Depreciation has been provided on the land element of property plant and equipment and this is contrary to IAS 16 ... View the full answer