AUdit homework: The auditor for Super Construction Berhad identified the following events that occurred after the balance
Question:
AUdit homework:
The auditor for Super Construction Berhad identified the following events that occurred after the balance sheet date of the company for the financial ended 31 October 2021:
(i) A large account receivable was considered partly collectible at the balance sheet date. The account receivable was declared bankrupt on 23 November 2021.
(ii) The tax authorities took legal action against Super Construction Berhad for under declaring for the years of assessments 2017 and 2018. In the accrued tax payable account, Super Construction Berhad had recognised the full amount of additional tax payable. The court ruled in favour of Super Construction Berhad on 1 December 2021. The tax authorities will not appeal the ruling of the court.
(iii) A business unit of Super Construction Berhad was sold on 15 November 2021. The assets of this business unit constituted 45% of Super Construction Berhad’s total assets at 31 October 2021, and the new owner assumed all the liabilities of the business unit.
(iv) On 13 November 2021, a research analyst issued a negative report on Super Construction Berhad’s long-term prospects. The share price of the company subsequently declined by 35%.
(v) During the board of directors’ meeting on 3 November 2021, the board approved a substantial increase in the advertising budget of the company for the financial year ending 31 October 2022.
(vi) An item of inventory valued at RM1 million was recorded at cost at 31 October 2021. The inventory was subsequently sold at a discount and the company realized a loss of RM150,000 in November 2021.
The auditor completed the audit and issued the audit report on 1 December 2021.
QUestion:
(a) Describe how each of the above events should be accounted for in the financial statements of Super Construction Berhad for the year ended 31 October 2021. Explain your answer. Assume that the events are independent of each other and should be considered separately.
(b) Discuss how the auditor would deal with events that have a material impact on the financial statements which occurred after the date of the auditor’s report of 1 December 2021.
Expert Answer:
Describe how each of the above events should be accounted for in the financial statements of Super Construction Berhad for the year ended 31 October 2021 Explain your answer Assume that the events are ... View the full answer
