Acme Ltd is a company in the chemical industry, situated near the Werribee River. Its year end is 30th June 2022 and you were engaged as the auditor on that date. The profit before taxation shown in the draft accounts to 30th June is $25,500,000. The following matters have come to your attention: On 30th December 2021, the company allowed a chemical by-product to flow into the Werribee River which caused noxious fumes to float over the city centre. The company is being sued by the local council for the cost of cleaning the river and sundry other claims. The company directors believe it has a good defence. The amount involved is not yet known. With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation.
Acme Ltd is a company in the chemical industry, situated near the Werribee River. Its year end is 30th June 2022 and you were engaged as the auditor on that date. The profit before taxation shown in the draft accounts to 30th June is $25,500,000. The following matters have come to your attention: On 30th December 2021, the company allowed a chemical by-product to flow into the Werribee River which caused noxious fumes to float over the city centre. The company is being sued by the local council for the cost of cleaning the river and sundry other claims. The company directors believe it has a good defence. The amount involved is not yet known. With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Acme Ltd is a company in the chemical industry, situated near the Werribee River. Its year end is 30th June 2022 and you were engaged as the auditor on that date. The profit before
The following matters have come to your attention:
- On 30th December 2021, the company allowed a chemical by-product to flow into the Werribee River which caused noxious fumes to float over the city centre. The company is being sued by the local council for the cost of cleaning the river and sundry other claims. The company directors believe it has a good defence. The amount involved is not yet known.
With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation.
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