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Discuss how the event will be treated

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Reference no: EM133020060

Question - Sunlight Ltd has placed deposits with its major overseas supplier, located in Adelaide in Australia, totaling AUD700,000 to manufacture specially branded shoes on 25 May 2021. On 7 June 2021, the overseas supplier ceased its business due to Lockdown Order in Australia issued due to the COVID-19 pandemic.

The legal team at Sunlight has informed you on 11 July 2021 that the deposit would not be recovered from the overseas supplier. Sunlight Ltd purchased over AUD6 million worth of branded shoes from this supplier every year.

Sunlight Ltd audit's year-end is 30 June 2021, and the audit report is due to be signed on 15 August 2021.

Required -

(a) Discuss four (4) reasons why auditors need to document their work in the working papers.

(b) Discuss how the above event will be treated in the financial statements of Sunlight Ltd for the year ended 30 June 2021.

Reference no: EM133020060

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