Reference no: EM132602583

Question - Assume that you are auditing Pacific Tours Ltd for the year ended 31 December 2019. The financial report will be approved and signed by the directors on January 2020, with the auditor's report signed on the same date. The audited financial report will be issued on 12 February 2020. After 31 December 2019, the following information came to light:

1. On 1 December 2020, the government issued a travel warning to a number of Pacific Islands. Forty-five per cent of Pacific Tours's business comes from running adventure tours in the islands mentioned in the warning.

2. On 15 January 2020, one of Pacific Tours' clients, Jungle Adventures, went into liquidation. Jungle Adventures purchased travel packages in bulk. A letter from the liquidator dated 30 January 2020 indicated that creditors were likely to receive '$0.10 in the dollar'. At 31 December 2019, Jungle Adventures owned Pacific Tours $1,245,285 and Pacific Tours had provided for 10 per cent of the amount owed as a doubtful debt.

3. On 9 February 2020, a bus transporting a Pacific Tours tour group in New Zealand crashed. Some passengers on board, including the Pacific Tours guide, and the driver had minor injuries. Pacific Tours is concerned about the negative publicity relating to the crash.

Required -

1. Discuss the subsequent events and differentiate between adjusting and non-adjusting subsequent events.

2. For each situation above, assess the type of subsequent event and how each would impact Pacific Tours' financial report for the year ended 31 December 2019, if at all.