Audit Risk 8
During the year, Esk Co was informed by the tax authorities that it was under investigation for a breach of legislation relating to sales tax.
Esk Co has appointed a tax consultant who has advised that there does appear to have been a breach of tax legislation and has estimated that a fine and penalty totalling $0.6m will be payable.
The directors do not intend to record anything in the financial statements until final notification is provided by the tax authority, which is due to be received on 31 January 20X6.
Identify and Explain the Audit Risk