Your Client's Balance Sheet Date Is 30/6/2012, the Audit Report

question 51

Essay

Your client's balance sheet date is 30/6/2012, the audit report date is 31/8/2012 and the financial statements are issued 15/9/2012. A customer with a material outstanding accounts receivable balance declared bankruptcy on 5/7/2012 due to a warehouse fire that occurred 27/6/2012. State whether this situation warrants an adjustment to the financial statements, disclosure in footnotes but no adjustment or no action is required. Justify your answer.

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Definitions:

Stomach

A digestive organ that breaks down food, mixing it with gastric juices to begin the digestion process.

Liver

A vital organ in the human body that performs essential functions like detoxification, protein synthesis, and production of biochemicals necessary for digestion.

Spleen

The spleen is an organ located under the ribcage and above the stomach in the left upper quadrant of the abdomen, involved in filtering blood, storing white blood cells, and destroying old red blood cells.

Brachiocephalic Vein

A large vein in the upper chest that forms from the union of the internal jugular and subclavian veins and carries blood to the heart.