Question

You are the auditor of Super Fresh Pty Ltd (SPFL) for the year ended 30 June 2019.

SPFL is a manufacturer of tinned shellfish products. It purchases fresh shellfish from local suppliers, and frozen shellfish from South East Asia and processes it into tins at its Darwin factory and then transports it by road to supermarkets around Australia.

You became aware of the following material event:

• On 1 July 2019 a customer at a Palmerston supermarket purchased a tin of SPFL prawns and took it home to have with dinner. That night she became violently ill and was hospitalised. It was discovered that the cause of her illness was the tin of prawns, which was part of a contaminated batch made from a material batch of shellfish imported from South East Asia. The customer suffered severe pain and paralysis that is likely to be permanent. As a result, she lodged a lawsuit against SPFL on 15 August 2019 for unspecified damages, due to the serious long-term effects of her injuries.

The financial statements and auditor’s report are due to be finalised on 31 August 2019.

REQUIRED

1. Explain how the event identified above should be treated by SPFL in the financial statements.

2. Outline the implications for the auditor’s report, if any, assuming that this event is appropriately treated as per requirement (a). Justify your answer.                                          

3. Determine the type of auditor’s opinion that you should issue if SPFL does NOT appropriately reflect this event in the financial statements. Justify your answer.                     

d. Determine the type of auditor’s opinion that you should issue if SPFL will NOT allow you to obtain a solicitor’s letter concerning the lawsuit. Justify your answer.          

Answer 1