Auditing and Assurance 1: Case Study Analysis and Reporting

This document presents a case study analysis of three scenarios within Auditing and Assurance, focusing on the application of IAS 10 (Events After the Reporting Period) and IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations). The first case examines the withdrawal of an investment and its impact on the going concern assumption, requiring specific accounting treatment, audit evidence, and a qualified audit report. The second case addresses the classification of an asset held for sale, specifically property, in accordance with IFRS 5, outlining accounting treatment, audit evidence, and an unqualified audit opinion. The third case involves the non-renewal of a financing agreement, also potentially impacting the going concern assumption, necessitating accounting treatment, audit evidence, and a qualified audit report. The analysis provides details on accounting treatments, required audit evidence, and the appropriate audit report opinions based on each scenario, referencing relevant standards and providing source citations.

AUDITING AND ASSURANCE 1
AUDITING AND
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AUDITING AND ASSURANCE 2
Case 1:
As per the requirements of IAS 10 that deals with the events occurring after the reporting
date, the adjusting financials for the adjusting events are the events that have taken place after
the date of the balance sheet. This is the information that specifies the conditions as at the end
of the date of reporting and it further includes the events that indicate the going concern
assumption with regard to any part or to the whole part of the company.
In case, there comes an issue after the end of the period of reporting, then the company shall
prepare the financials following the going concern basis in case the management determines
the same as at the end of the period of reporting. This is when there is an intention of
liquidating the company or when the trading is ceased or when there is as such no realistic
alternative with regard to the same. With regard to the disclosures of such events, if the case
is such that the non-disclosure of it would result in inadequate decision making of the
decision makers, then the nature of the event, the financial effect of such of the event or the
statement which is estimated to be affected would be made. if the company choses, it could
make the disclosures of these conditions that exists as at the end of the period of reporting
which would show the information that it receives after the period of reporting. The
companies are duty bound to disclose all of the financials when they are authorised for the
issue that gave them the authorisation. If the owners of the company feel that they must
amend the financials after the same have been issued, then this has to be stated therein the
financials in the notes to section ("IAS 10 — Events After the Reporting Period", 2019).
Accounting treatment:
Now, in the given case, the accounting treatment of the stated event would be that the
withdrawal of the investment shall be stated and be disclosed in the notes to accounts in the
financial statements. Also, the stated event will have to be disclosed along with the amount of
investment which is being withdrawn.
Audit evidence:
A letter from the management will have to be taken by the auditor with regard to the fact that
they are looking for a new investor and if they have found one, the letter will have to be
obtained from that new investor.
Audit report:

AUDITING AND ASSURANCE 3
A qualified audit report shall be issued would be issues since the stated event threatens the
going concern assumption of the company. The materiality of this event affects the company.
Case 2:
As per IFRS 5 which deals with the non-current assets held for sale and discontinued
operations, any asset shall eb classified as such when there is probability that the asset would
be sold within the period of 12 months, there is a potential buyer for the same, and the asset is
available for immediate sale. Since all of these conditions are satisfied, an asset shall be held
for sale, property in the given case.
Accounting treatment:
The fact of sale shall be stated in the final accounts. Since the government has not taken over
the property till now, hence, no accounting treatment has to be done for now.
Audit evidence:
Letter from an intendent valuer will have to take by the auditor with regard to the fair value
of the stated property. This will have to be reported at its fair value in the financials then. The
audit procedures to be extended would include the following of fair value hierarchy.
Audit report:
In the stated case, an unqualified opinion shall be issued since the fact of government
compulsorily taking over the property without paying any compensation is not certain.
("IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations", 2019).
Case 3:
As per the requirements of IAS 10 that deals with the events occurring after the reporting
date, the adjusting financials for the adjusting events are the events that have taken place after
the date of the balance sheet. This is the information that specifies the conditions as at the end
of the date of reporting and it further includes the events that indicate the going concern
assumption with regard to any part or to the whole part of the company.
In case, there comes an issue after the end of the period of reporting, then the company shall
prepare the financials following the going concern basis in case the management determines
the same as at the end of the period of reporting. This is when there is an intention of
liquidating the company or when the trading is ceased or when there is as such no realistic
alternative with regard to the same. With regard to the disclosures of such events, if the case

AUDITING AND ASSURANCE 4
is such that the non-disclosure of it would result in inadequate decision making of the
decision makers, then the nature of the event, the financial effect of such of the event or the
statement which is estimated to be affected would be made. if the company choses, it could
make the disclosures of these conditions that exists as at the end of the period of reporting
which would show the information that it receives after the period of reporting. The
companies are duty bound to disclose all of the financials when they are authorised for the
issue that gave them the authorisation. If the owners of the company feel that they must
amend the financials after the same have been issued, then this has to be stated therein the
financials in the notes to section.
Accounting treatment:
The fact of non-renewal of the financing agreement shall be stated in the final accounts. The
bank does not want to renew the financing agreement with the company.
Audit evidence:
A letter from management will have to be received wherein the fact of restatement of the
accounts will be done by them ("SA 570 – Evaluating the going concern assumption", 2019).
Audit report:
A qualified audit report will have to be issued since when there is a circumstance wherein the
going concern assumption of the company is being threatened, then in such a case, a qualified
opinion will have to be issued ("What Are the 4 Types of Audit Reports?", 2019).

AUDITING AND ASSURANCE 5
References:
IAS 10 — Events After the Reporting Period. (2019). Retrieved 4 October 2019, from
https://www.iasplus.com/en/standards/ias/ias10
IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations. (2019). Retrieved
4 October 2019, from https://www.iasplus.com/en/standards/ifrs/ifrs5
SA 570 – Evaluating the going concern assumption. (2019). Retrieved 4 October 2019, from
https://home.kpmg/content/dam/kpmg/in/pdf/2018/05/AAU-May2018_Chapter3.pdf
What Are the 4 Types of Audit Reports?. (2019). Retrieved 4 October 2019, from
https://smallbusiness.chron.com/4-types-audit-reports-3794.html