Question 1

SECTION A - CASE 2: GREENHARVEST CO-OP

SCENARIO:
You are the audit senior for GreenHarvest Co-op, a large agricultural cooperative, for the year ended 31 March 20X5. The audit is nearing completion. During the review phase, you note the following:
1) A major customer, representing 15% of receivables, went into liquidation on 15 April 20X5.
2) GreenHarvest is facing a lawsuit from a supplier regarding contaminated fertilizer, which the legal counsel advises has a 30% chance of success.
3) The directors have refused to disclose a key executive's remuneration, which is required by local legislation, though the amount is immaterial to the financial statements as a whole.

QUESTION:
How should the liquidation of the major customer on 15 April 20X5 be treated in the financial statements for the year ended 31 March 20X5?

Accepted Answer

Determine if the liquidation provides evidence of conditions existing at the reporting date (adjusting) or conditions arising after (non-adjusting).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Classifying it as a non-adjusting event simply because the legal liquidation date was after year-end.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 1

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