A&A Chartered Accountants (A&A) is responsible for the financial statements audit of Apex Limited

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A&A Chartered Accountants (A&A) is responsible for the financial statements audit of Apex Limited. The company's financial year ended on 31 March 2020. It was agreed between A&A and Apex Limited that the audit report will be signed on 25 May 2020 and the financial statements will be issued to the public on 10 June 2020.

 

Listed below are events that occurred or are discovered after the end of the financial year. Assuming that each event has a material effect on the financial statements.

 

i)On 1 May 2020: You discovered that a lawsuit was filed against Apex Limited by a customer for damages that occurred before 31 March. According to the opinion of the company's lawyer, Ben Walker, there is a high possibility that Apex Limited may lose the case. However, Ben could not quantify the amount - but it will be a significant loss for the company.

 

ii) On 15 May 2020: You discovered that one of the debtors of Apex Ltd went bankrupt on 10 May 2020. The most recent sale was on 25 February and no transactions have occurred since that date.

 

iii) On 30 May 2020: You discovered that Debtor B of Apex Limited went bankrupt on 15 May 2020. Sales associated with this debtor occurred before the end of the 2020 financial year.

 

iv) On 15 June 2020: A fire burnt down one of Apex Limited's warehouses, resulting in a loss of 30% of the inventory that was on hand at that date

 

QUESTION)

(a) Indicate the responsibilities of the auditor for each of the above events. 

?(b) Determine whether each of the above events are adjusting or non-adjusting events. Indicate the type of disclosure (if any) that the auditor would recommend in relation to each of the above four events.