(b) (i) Matters and actions to take
Generally 1 mark per comment/recommended action explained:
– Calculation and determination of materiality (1 mark for each of the work in progress and the deferred income)
– Contract cancellation is an adjusting event after the reporting period
– The work in progress should be written off and charged to profit unless it can be used on a different contract
– The deferred income may be repayable, if not it should be released to profit
– Audit report implications if necessary adjustments not made
– Integrated report may be inconsistent with financial statements or contain a misstatement of fact
– Auditor’s responsibility to read the integrated report to identify inconsistencies/misstatements
– Matters to be discussed with management/those charged with governance
Maximum marks 7