Question 3a
Marking Guide

(a) Matters, further actions and auditor’s report implications

Up to 1 mark for each point unless otherwise stated

Matters
 – Materiality calculation with conclusion
 – Disclosure rules re held for sale/discontinued operations
 – Application to the scenario to conclude asset is held for sale (HFS)
 – Material misstatement of classification and disclosure
 – Accounting rule on valuation of held for sale assets
 – Rule that depreciation should cease when asset meets criteria of HFS
 – Application to the scenario to derive correct value
 – Materiality of the error in valuation
 – Circumstances when a prior year adjustment is permitted
 – Application to the scenario/conclusion permitted in this circumstance
 – Details of disclosure requirements
 – Conclusion that material omission in disclosures

Further actions
 – Request adjustment from management to recognise the discontinued operation and to separately disclose the assets held for sale
 – Request management to amend the carrying amount of the assets to the recoverable amount of £42 million
 – If management refuse escalate to Those Charged With Governance (TCWG)
 – If still refuse obtain written representation confirming intent to proceed

Auditor’s report implications
 – Qualified on basis of material misstatement or adverse
 – Justification of whether pervasive
 – Basis of opinion paragraph position and content

Maximum marks 15