Question 1

SECTION A - CASE 2: GREENHARVEST CO-OP

SCENARIO:
You are the audit senior for GreenHarvest Co-op, a large agricultural cooperative, for the year ended 31 March 20X5. The audit is nearing completion. During the review phase, you note the following:
1) A major customer, representing 15% of receivables, went into liquidation on 15 April 20X5.
2) GreenHarvest is facing a lawsuit from a supplier regarding contaminated fertilizer, which the legal counsel advises has a 30% chance of success.
3) The directors have refused to disclose a key executive's remuneration, which is required by local legislation, though the amount is immaterial to the financial statements as a whole.

QUESTION:
What is the impact on the auditor's report of the directors' refusal to disclose the key executive's remuneration?

Accepted Answer

Recognize that certain items (like directors' remuneration or related party transactions) are material by nature, even if the monetary value is small. Then determine the appropriate modification.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Choosing unmodified opinion because the scenario states the amount is 'immaterial'. Students must remember 'material by nature'.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 1

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