Reference no: EM133087828

Questions -

(a) ASA700 (Revised) 'Forming an Opinion and Reporting on a Financial Report' provides a new form of audit report. What is the change made in relation to Key Audit Matters and Audit Opinion? Explain how these changes potentially contribute to reducing the audit expectation gap.

(b) On 2 August 2021 Safe Automation, your client, was informed by one of its major long-standing customers that it was having going concern problems and that paying the large amount owed to Safe Automation was going to be difficult. No amount has been received from the customer since June 2021. The directors of Safe Automation believe that it is not necessary to adjust the receivable balance at 30 June 2021 as the customer has always paid them in the past, especially as the audit report has been signed. The financial year-end was 30 June 2021, the auditor's report was signed on 30 July 2021, and the financial statements will be mailed to shareholders on 5 August 2021.

(i) Identify and explain the type of the above subsequent event, and how it should be treated in the financial report.

(ii) What further evidence would you seek in relation to the matter?

(iii) What audit opinion would be appropriate if the directors of Safe Automation refuse to follow the auditor's recommendations regarding the above event? Justify your answer.