Question 1

CASE SCENARIO: AquaPure Utilities Co
AquaPure Utilities Co is a recently privatized water utility company. You are an audit manager at Blue & Co, responsible for the audit of AquaPure for the year ended 31 December 20X5. AquaPure operates highly specialized water treatment facilities. Management has requested that Blue & Co provide a valuation service for a newly constructed, complex water filtration plant, as AquaPure lacks the internal expertise to value it for inclusion in the financial statements. The filtration plant represents 15% of AquaPure's total assets. Furthermore, during the year, AquaPure was fined by the environmental regulator for a minor chemical spill, which the financial controller has refused to disclose in the financial statements, arguing it is not material by size.

QUESTION:
If the auditor concludes that the environmental fine is qualitatively material and management still refuses to disclose it, what is the most appropriate impact on the auditor's report?

Accepted Answer

Determine the nature of the issue (misstatement vs. lack of evidence) and its pervasiveness. Missing disclosure = misstatement. Material but not pervasive = Qualified opinion.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing a limitation on scope (lack of evidence) with a disagreement (misstatement), or jumping straight to an adverse opinion for any material error.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 6

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