Tom Jones has recently been employed as trainee Accountant of Michael Enterprise Company Limited and currently the

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Question:

Tom Jones has recently been employed as trainee Accountant of Michael Enterprise Company Limited and currently the financial statement are be prepared for the year-ended
30 September 2021. The financial statements are expected to be approved in the Annual General Meeting, which is to be held on Monday - 28 November 2021.
Today’s date is 22 November 2021. The auditors have been made aware of the following matters:

1. On 14 October 2021, a material fraud was discovered by the bookkeeper. The payables ledger assistant had been diverting funds into a fictitious supplier bank account, set up by the employee, which had been occurring for the past six months. The employee was immediately dismissed. Legal proceedings against the employee have been initiated and the employee’s final wages have been withheld as part reimbursement to the company.

2. On 20 September 2021, a customer initiated legal proceedings against the company in relation to a breach of contract. On 29 September 2021, the company’s legal advisors informed the directors that it was unlikely the company would be found liable; therefore no provision has been made in the financial statements, but disclosure as a contingent liability has been made.
On 29 October 2021 the court found the company liable on a technicality and it is now required to pay damages amounting to a material sum.

3. On 19 November 2021 a customer ceased trading due to financial difficulties and owing $2.5m. As the financial statements are needed for the Board meeting on 22 November 2021, you have decided that because the amount is immaterial, no adjustment is required. The auditors have also confirmed that this amount is immaterial to the draft financial statements.

Required:

Discuss whether amendments are required to the financial statements.