(a) When aggregate uncorrected misstatements are material, suggest two actions that the auditor should take.

(b) There was a fire at one of Discord’s factories in late July 2021. Some machinery, raw materials and finished products were burned out or damaged in the fire. The insurance company was informed and an investigation showed that the factory supervisor was at fault for not following the safety procedures. As a result, on 15 August 2021 the insurance company has refused to accept the claim. The financial year-end is 30 June 2021, and the auditor’s report will be signed on 20 August 2021.

(i) Identify and explain the type of the above subsequent event, and how it should be treated in the financial report.

(ii) What further evidence would you seek in relation to the matter?

(iii) What audit opinion would be appropriate if the directors of Discord refuse to follow the auditor’s recommendations regarding the above event? Justify your answer.

Answer rating: 100% (QA)

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