You Are Reviewing the Audit Files of Monty Ltd with a View

question 6

Essay

You are reviewing the audit files of Monty Ltd with a view to finalising the audit. From your review of the files you identify the following factors. Identify whether or not they can be
a) Ignored
b) Whether the financial statements might have to be amended
c) Whether or not the financial statements should include a reference by way of a note without any adjustment to the figures
In the table below tick the response you feel is the most appropriate

	Ignore	Amend financial statements	Refer by way of note
A Receivable amounting to £15,000 has gone into liquidation after the year end and no amounts will be recovered. Total Receivables amount to £1.2m and the pre tax profit for the year is £750,000
Since the year end the company closed four out of its eight branches
Audit investigations have indicated that the latest position on one of the long term contracts in progress is that it is likely to make a loss of £200,000. The value of Long term work in progress is £5.0m and the pre tax profit for the year is £750,000
Since the year end the company acquired one of its smaller competitors for £1.25 m. They financed this acquisition by means of an issue of shares amounting to £1m.
The bank financing arrangements were revised and renewed shortly after the year end. There were no changes to previous arrangements except an increase in the overdraft limit of £250,000
The Chief Executive left one month after the year end. The Chairman is currently carrying out her duties whilst a replacement is being sough
After the year end the Head Office was flooded and the ground floor meeting rooms and staff kitchens were badly damaged. The accounting function and IT facilities were not affected. The costs of repair are covered by insurance.

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Definitions:

Alcohol Detoxification

The process of removing toxic substances, specifically ethanol, from the body, often under medical supervision, to manage withdrawal symptoms from alcohol dependency.

Rationalization

A defense mechanism where controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.

Ongoing Treatment

A continuous process of medical or therapeutic care provided to manage or improve a particular health condition.

Last Drink

Refers to the most recent occasion on which an individual consumed an alcoholic beverage, often inquired about in contexts related to alcohol abuse treatment or legal issues around impaired driving.