(b) You are the audit manager of Petrie Co, a private company, that retails kitchen utensils. The draft financial
statements for the year ended 31 March 2007 show revenue $42·2 million (2006 – $41·8 million), profit before
taxation of $1·8 million (2006 – $2·2 million) and total assets of $30·7 million (2006 – $23·4 million).
You are currently reviewing two matters that have been left for your attention on Petrie’s audit working paper file
for the year ended 31 March 2007:
(i) Petrie’s management board decided to revalue properties for the year ended 31 March 2007 that had
previously all been measured at depreciated cost. At the balance sheet date three properties had been
revalued by a total of $1·7 million. Another nine properties have since been revalued by $5·4 million. The
remaining three properties are expected to be revalued later in 2007. (5 marks)
Required:
Identify and comment on the implications of these two matters for your auditor’s report on the financial
statements of Petrie Co for the year ended 31 March 2007.
NOTE: The mark allocation is shown against each of the matters above.
正确答案：
(b)Implicationsforauditor’sreport
(i)Selectiverevaluationofpremises
Therevaluationsareclearlymaterialtothebalancesheetas$1·7millionand$5·4millionrepresent5·5%and17·6%
oftotalassetsrespectively(and23·1%intotal)Astheeffectsoftherevaluationonlineitemsinthefinancialstatements
areclearlyidentified(egrevaluedamountdepreciationsurplusinstatementofchangesinequity)thematterisnot
pervasive
Thevaluationsoftheninepropertiesaftertheyearendprovideadditionalevidenceofconditionsexistingattheyearend
andarethereforeadjustingeventsperIAS10EventsAftertheBalanceSheetDate
Tutorialnote:Itis‘now’stilllessthanthreemonthsaftertheyearendsothesevaluationscanreasonablybeexpected
toreflectyearendvalues
HoweverIAS16PropertyPlantandEquipmentdoesnotpermittheselectiverevaluationofassetsthusthewholeclass
ofpremiseswouldneedtohavebeenrevaluedfortheyearto31March2007tochangethemeasurementbasisforthis
reportingperiod
TherevaluationexerciseisincompleteUnlesstheremainingthreepropertiesarerevaluedbeforetheauditor’sreporton
thefinancialstatementsfortheyearended31March2007issignedoff:
(1)the$7·1revaluationmadesofarmustbereversedtoshowallpremisesatdepreciatedcostasinpreviousyears;
OR
(2)theauditor’sreportwouldbequalified‘exceptfor’disagreementregardingnon-compliancewithIAS16
Whenitisappropriatetoadopttherevaluationmodel(egnextyear)thechangeinaccountingpolicy(fromacostmodel
toarevaluationmodel)shouldbeaccountedforinaccordancewithIAS16(ieasarevaluation)
Tutorialnote:IAS8AccountingPoliciesChangesinAccountingEstimatesandErrorsdoesnotapplytotheinitial
applicationofapolicytorevalueassetsinaccordancewithIAS16
Assumingtherevaluationiswrittenbackbeforegivinganunmodifiedopiniontheauditorshouldconsiderwhythethree
propertieswerenotrevaluedInparticularifthereareanyindicatorsofimpairment(egphysicaldilapidation)there
shouldbesufficientevidenceontheworkingpaperfiletoshowthatthecarryingamountofthesepropertiesisnot
materiallygreaterthantheirrecoverableamount(iethehigherofvalueinuseandfairvaluelesscoststosell)
Ifthereisinsufficientevidencetoconfirmthatthethreepropertiesarenotimpaired(egiftheauditorwasprevented
frominspectingtheproperties)theauditor’sreportwouldbequalified‘exceptfor’ongroundsoflimitationonscope
Ifthereisevidenceofmaterialimpairmentbutmanagementfailtowritedownthecarryingamounttorecoverable
amounttheauditor’sreportwouldbequalified‘exceptfor’disagreementregardingnon-compliancewithIAS36
ImpairmentofAssets
