Muhd Hazmi is the Financial Controller of a public listed company, Touch and Die Bhd. Earlier on, he was notified that an audit firm, Fattah & Amin, has been engaged to audit the company's financial statements for the year ended 31 December 2017. In a recent meeting with the company's substantial shareholder, Datuk Hans, Muhd Hazmi told him the status report of the audit, citing that most of the fieldwork has been completed, and that Fattah & Amin targeted the audit report to be issued on 15 February 2018. In response to a query regarding remaining work to be done, Muhd Hazmi told Datuk Hans that to his best knowledge, the remaining major task that must be done by Fattah & Amin is a subsequent events review.

Meanwhile, in connection with the audit, Fattah & Amin is aware of certain events and transactions that may affect the financial statements. Those events and transactions took place after 31 December 2017, but before the issuance of the audit report dated 15 February 2018.

The three (3) material events are :

a.            On 15 January 2018, Touch and Die Bhd settled and paid a personal severe injury claim of a former employee as a result of an accident that occurred during work on March 2017. Touch and Die Bhd. had not previously recorded or provided a liability for the claim

b.            On 20 January 2018, Touch and Die Bhd agreed to purchase for cash, substantial outstanding inventories of another company The acquisition is likely to double the future sales volume of Touch and Die Bhd

c.             On 1 February 2018, a warehouse owned by Touch and Die Bhd was severely damaged by a fire resulting in an uninsured substantial loss of inventories kept mside the warehouse

REQUIRED:

(a) Assuming you are Muhd Hazmi, describe the purpose of a subsequent event review to Datuk Hans. (2 Marks)

(b) Explain to Datuk Hans, the responsibility of Fattah & Amin to discover the subsequent events after the completion of audit field work, but before the issuance of an audit report. (2 Marks)

(c) Describe TW0 (2) types of subsequent events that require Fattah & Amin's consideration and evaluation. (4 Marks)

Answer rating: 100% (QA)

answers a Subsequent events are the events that occur after the balance sheet date but before the fi... View the full answer