Figure 7.18 shows a liquid-level system in which two tanks have cross-sectional areas A1 and A2, respectively. The volume flow rate into tank 1 is qi. A pump is connected to the bottom….
identify and discuss the most likely auditor’s opinion that you would issue on each financial report for the year ending 30 June 20X8.
You are the audit partner at Arthur Dunger & Associates, a mid-tier audit firm. You are responsible for the audits of the following three independent entities for the year ended 30 June 20X8: (a) Kids In Crisis Ltd is a non-profit entity. You have discovered that it has not kept substantiating vouchers or receipts for more than 65 per cent of its expenses, excluding salaries and allowances. (6 marks) (b) High Rise Ltd is a building contractor with a varying workload. In order to compensate for the irregularity of its contracted building projects, High Rise also purchases large vacant blocks of land that it later subdivides for the construction of houses and units. High Rise then sells these on its own account. Your analysis strongly suggests that the apportionment of costs to houses and units sold has been kept low in order to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree, and hold to their view that the stock of properties is correctly valued. (7 marks) (c) Major Promotions Ltd arranges for popular overseas entertainment artists to perform in Australia. The band Eclipse was booked by Major Promotions to play in major cities across the country. Major Promotions's written contract required the company to pay the band in US dollars but, in order to reduce costs; it did not hedge the amounts. Subsequent to year end, the Australian dollar fell against the US dollar and a substantial loss relating to the band's tour was predicted. The management of Major Promotions tried unsuccessfully to renegotiate the band's contract and has been unable to obtain finance to cover the expected shortfall. Major Promotions has now cancelled the tour and expects a substantial claim from Eclipse. It is clear to you, as the auditor, that Major Promotions does not have the income, cash or other assets to sustain such a loss. (7 marks) Required: Assuming that all amounts involved are material, identify and discuss the most likely auditor's opinion that you would issue on each financial report for the year ending 30 June 20X8. Include in your answer an explanation as to how you came to your decision.