Discuss the auditors responsibility for identifying subsequent events for the following two conditions for (a) and (b)
Question:
Discuss the auditor’s responsibility for identifying subsequent events for the following two conditions for (a) and (b)
(a) prior to the completion of audit fieldwork
(b) prior to signing the audit report
(c) As an auditor of Sigma Travel Ltd for the year ended 30 June 2020. The financial report will be approved and signed by the directors on 30 July 2020, with the auditor’s report signed on the same date. The audited financial report will be issued on 12 August 2020.
After 30 June 2020 the following information came to the following scenarios:
- On 15 July 2020, one of Sigma Travel clients, Tracking Adventures went into liquidation. Tracking Adventures purchased travel packages in bulk. A letter from the liquidator dated 30 July 2020 indicated that creditors were likely to receive ‘$0.20 in the dollar’. On 30 June 2020, Tracking Adventures owed Sigma Travel $2 135 878 and Sigma Travel had provided for 15 percent of the amount owed as a doubtful debt.
- On 9 August 2020, a bus transporting a Sigma Travel tour group in Fiji crashed. Some passengers on board, including the Sigma Travel guide and the driver had minor injuries. Sigma Travel is concerned about the negative publicity relating to the crash.
For each of the above events or transactions (1 and 2), determine the treatment required and identify audit procedures that should have brought the item to the auditor’s attention in the financial report for the year ended 30 June 2020.
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton