(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