Question

Audit Report: Produce a draft audit report  for the situation described below. Assume that no other situations affecting the audit opinion have arisen. You should be ready to explain and justify each element of your reports.

i. Assume that your analysis of situations relating to contingences expose a high risk relating to contingent liability. You have communicated to the Governing Board, but this particular board fails to take the situation seriously. Evaluate the implications of this on the audit report and opinion.

Answer 1

As per Audit diclosure, all contingency asset and liability should be disclosed as part of foot notes of AFS.

It is been disclosed but it does not affects financials or Tax, since it is contingency does not matter whether high risky or low risk.

As it is already diclosed as foot note, it will impact financal as soon as it is incurred. and same will account in that particular year.

Incase it impact cash flow to organisation, it is Management need to plan accordingly.