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Question

Tod Brooker, a registered company auditor, has completed the audit of the financial report of Mayfair Ltd for

the year ended 30 June 2018. Mike also audited the financial report for Mayfair for the previous financial

year. He drafted the following report for 30 June 2015:

We have audited the statement of financial position, income statement, statement of cash flows and statement of

changes in equity for Mayfair Ltd as of 30 June 2018. Our audit was made in accordance with an applicable financial

reporting framework. In our opinion, the above-mentioned financial statements are accurately and fairly presented in

accordance with generally accepted accounting principles in effect at 30 June 2018.

Tod Brooker, CA

20 August 2018

Other information

1. During the year, Mayfair changed its method of accounting for long-term construction contracts. It properly

reflected the effects of the change in the current year's financial statements and restated the previous year's

statements. Tod is satisfied with Mayfair's justification for making the change. The change is discussed in Note

20 to the financial statements.

2. Tod was unable to perform normal accounts receivable confirmation procedures, but he used

alternative procedures to satisfy himself as to the validity of the receivables.

3. Mayfair is the defendant in a litigation case, of which the outcome is highly uncertain. If the case is

settled in favour of the plaintiff, Mayfair will be required to pay a substantial amount of cash that may

require the sale of certain non-current assets. The litigation and possible effects have been properly

disclosed in Note 22 to the financial statements.

Required

(a) Consider all the above facts and the pertinent requirements of ASA 700 (ISA 700), and then rewrite the

auditor's report in an acceptable and complete format, incorporating any necessary departures from an

unmodified report.

(b) Identify any items included in the 'Other information' section that would not affect the auditor's report.

Explain why this is the case.

Step-by-step answer

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Subject: Accounting, Business

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