Use the Information in the Following Paragraphs to Answer Question

question 18

Essay

Use the information in the following paragraphs to answer question
You are the auditor of Whizzipop plc a manufacturer of soft drinks. The draft consolidated
financial statements for the year ended 30 September 2X18 show revenue of $125 million (2X17 - $114 million), profit before taxation of $12.4 million (2X17 - $10.9 million) and total assets of $110 million (2X17 - $93 million).
It has several subsidiaries, some of which are audited by firms other than yours. The financial statements of one such subsidiary company, Twizzle, for the year ended 30 September 2X18, are audited by another firm. Profit before taxation of $0.4 million and total assets of $34.1 million have been included in the draft consolidated financial statements of Whizzipop. The notes to Twizzle's financial statements as at 30 September 2X18 disclose a contingent liability for a pending legal matter estimated at $0.2 million. In November 2X18, the courts found Twizzle to be liable for costs and damages amounting to $1.1 million. However, Twizzle's directors have refused to make a provision, for any amount, as they have lodged an appeal against the judgement.
-What action would you, as group auditor, take in respect of this liability?

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Definitions:

Concentration Account

A single centralized bank account designed to streamline cash management by consolidating funds from multiple accounts, often used by corporations to improve liquidity management.

Zero-Balance Account

A bank account that keeps a zero balance by instantly moving money from a primary account in the precise amount needed to settle any checks drawn on it.

Regional Offices

Physical locations established by companies in various regions or countries to handle local operations or provide support.

Lockboxes

A service offered by banks to companies for the collection of payment from customers, involving the use of special post office boxes.