You are a manager in the audit department of Nidge & Co, a firm of Chartered Certified Accountants, responsible for the audit of Darren Co, a new audit client operating in the construction industry. Darren Co’s financial year ended on 31 January 2015, and the draft financial statements recognise profit before tax of $22·5 million (2014 – $20 million) and total assets of $370 million, including cash of $3 million. The company typically works on three construction contracts at a time.

The audit is nearly complete and you are reviewing the audit working papers. The audit senior has brought several matters to your attention:

(c) For the first time this year, the financial statements are presented as part of an integrated report. Included in the integrated report are several key performance indicators, one of which states that Darren Co’s profit before tax has increased by 20% from the previous year. (6 marks)

Required:
Discuss the implications of the matters described above on the completion of the audit and on the auditor’s report, recommending any further actions which should be taken by the auditor.

Note: The mark allocation is shown next to each of the matters above.