You are the manager responsible for the audit of Thurman Co, a manufacturing company which supplies stainless steel components to a wide range of industries. The company’s financial year ended on 31 July 2016 and you are reviewing the audit work which has been completed on a number of material balances and transactions: assets held for sale, capital expenditure and payroll expenses. A summary of the work which has been performed is given below and in each case the description of the audit work indicates the full extent of the audit procedures carried out by the audit team.

(a) Assets held for sale
Due to the planned disposal of one of Thurman Co’s factory sites, the property and associated assets have been classified as held for sale in the financial statements. A manual journal has been posted by the finance director to reclassify the assets as current assets and to adjust the value of the assets for impairment and reversal of depreciation charged from the date at which the assets met the criteria to be classified as held for sale. The finance director asked the audit senior to check the journal before it was posted on the basis of there being no one with the relevant knowledge to do this at Thurman Co.

The planned disposal was discussed with management. A brief note has been put into the audit working papers stating that in management’s opinion the accounting treatment to classify the factory as held for sale is correct. The manual journal has been arithmetically checked by a different member of the audit team, and the amounts agreed back to the non-current asset register. (9 marks)

Required:
In respect of each of the three matters described above:
(i) Comment on the sufficiency and appropriateness of the audit evidence obtained;
(ii) Recommend further audit procedures to be performed by the audit team; and
(iii) Explain the matters which should be included in a report in accordance with ISA 265 Communicating Deficiencies in Internal Controls to Those Charged with Governance and Management.

Note: The split of the mark allocation is shown against each of the matters above.