The end of the financial year of Noccundra Ltd is 30 June 2035. Management plans to complete the draft financial statements on 15 August 2035 and submit them to the board of directors the next day. The board of directors is scheduled to review the financial statements at its meeting on 23 August 2035 and to authorise them for the issue to the shareholders. The annual general meeting of the shareholders is scheduled to be held on 14 September 2035.

Imagine that you are a recent graduate working for an accounting practice. Your manager has asked you to provide advice via a memo on the following two issues:

• During July 2035 the auditors found potentially fraudulent activities involving a staff member who created fictitious employees in the system. The auditors believe the activities commenced during the financial year ended 30 June 2035 and that wages expense could be overstated by $450,000.

• A COVID outbreak occurred in late July 2035 and a lockdown has been declared. Noccundra Ltd does not provide essential services and its operations have been closed. Management believes the lockdown could continue until mid to late September. The company is in a sound financial position, has significant cash reserves and investments and should be able to access some level of Commonwealth Government financial assistance.

Required:

1. For each issue, determine if it is an ‘event after the reporting period’ and if so, classify it as an ‘adjusting event’ or a ‘non-adjusting event’.

2. Outline the accounting treatment or disclosure requirements in relation to the first issue.

3. Outline the accounting treatment or disclosure requirements in relation to the second issue.

4. Provide advice in relation to the accounting treatment or disclosure requirements for the second issue.

Answer rating: 100% (QA)

Answer As4 Contingeniies and events occusing after the balomce sheet datte deals with the treatment ... View the full answer