Reference no: EM133042633
Question - Consider the following material and independent situations noted during the audit engagement of Whampoa - Whippy Ltd for the year ended 30 June, 2020.
(a) The draft Group Executive Chairman's report, which accompanies the annual financial report, states that the revenue of a certain business unit of the company's overseas operations increased by 70% (per cent) during the last twelve months. However, after checking these figures, the auditor has noted that revenue increased by only 7% (per cent).
(b) Whampoa-Whippy Ltd has a sophisticated supply chain management system. A large order of raw materials from a foreign supplier was shipped FOB (Free on Board) and the title passed on 11 June, 2020. The order of raw materials arrived on 25 July, 2020, but the purchase is not recorded yet in the 30 June, 2020 annual financial report.
(c) In the past twelve months there have been numerous cases of employees protesting outside the front of their workplace. Recently, a workplace dispute has seen the state-based trade unions win a pay increase of 4% (per cent) for its members. Based on the terms of the negotiated workplace enterprise agreement, the pay increase will be applied back to the 1 January, 2020. Whilst the Executive Management team has agreed to the pay increase, they have not, as yet, made any corresponding adjustment to the 30 June, 2020 financial report.
(d) The entire Queensland operational division of the company is under investigation by the Australian Taxation Office (ATO) for alleged failure to pay the appropriate amount of Pay As You Go (PAYG) tax on behalf of its workforce. Your early investigations have shown that the ATO does in fact have a convincing case against Whampoa-Whippy Ltd. However, you are surprised to learn that no mention of this case has been made in the 30 June, 2020 financial report.
Required - For each of the cases listed above (a) - (d), state the appropriate audit opinion and provide an explanation for each case, which justifies the audit opinion you have stated.
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