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You are the supervisor on audit of Platinum Pokie Club, a large suburban club in the Western Australia. And the usual club facility such as poker machines, bars and a bistro, the club also operates a large gymnasium, an indoor heated pool and the restaurant. 

The subsequent dates are relevant to the current audit engagement:

End of reporting period                      30 June 2012
Financial statements signed                15 August 2012
Auditor’s report signed                      15 August 2012
Annual report mailed to members        22 August 2012
You are attentive that the subsequent independent and material events have happened:

1. On 5 August 2012, the financial controller informed you that the board has just received a letter from assistant general manager, Mr. Tan. The letter having a confession: Mr. Tan has been lodging fraudulent expenditure claims over the precedent five years, amounting to some $40,000. The financial controller’s preliminary estimates indicate that this figure is materially correct; however he thinks it will take at least another 2 months before the exact figure is known. The police had been informed of the fraud and are searching for Mr. Tan, who seems to have left the country. 

2. On 17 August 2012, the financial controller informed you that on the preceding day a participant on one of the club’s aerobics classes, Ms. Peters, injured herself after slipping on gym floor. Ms. Peters is the spouse of one of the state’s leading barristers. A preliminary letter has already been acquired from Mr. Peters, stating that Ms. Peters intends to take legal action to recover the costs of medical treatment, plus damages, from the club. 

3. On 18 August 2012, the financial controller informed you that a serious fire taken place at one of the club’s kitchens throughout football celebrations. Though covered by insurance, the fire caused extensive damage to the bistro area and adjacent bar. Both the bistro and bar are expected to remain unserviceable until at least mid-September, resulting in an expected fall in revenue of around 7%.

4. On 23 August 2012, the general manager informed you that at 18 August 2012 the board decided to sell land it was holding as a long term investment. It seemed that an extremely generous offer was made by an overseas buyer. The contract is due to be signed on 25 August 2012. 

5. On 11 August 2012, the board signed a contract for the upgrade of the club’s air-conditioning system. The upgrade is essential to ensure compliance with workers compensation regulations. The first payment of $100,000 is due on 1 September 2012. Work will be completed (and the final contract payment made) by 30 June 2012.


(a) Elucidate what further evidence you would seek in relation to each of these matters.

(b) Illustrate the action, if any, you would recommend to management in relation to the accounting treatment of each items.

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  • Category:- Accounting Basics
  • Reference No.:- M91600

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