Brian Ltd is a company in the chemical industry, situated near the Murray River. Its year end is 30th June 2022 and you were engaged as the auditor on that date. The profit before taxation shown in the draft accounts to 30th June is $25,000,000. On 16th July 2022 the company’s premises situated close to the Murray River were flooded as the result of a freak storm. The company estimates that uninsured losses of $700,000 will arise ($400,000 stock loss and $300,000 damage to freehold property). With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity
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Problem 2C: It is the end of 2019 and you are an accountant for Stone Company. During 2019, sales of the...
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Brian Ltd is a company in the chemical industry, situated near the Murray River.  Its year end is 30th June 2022 and you were engaged as the auditor on that date.  The profit before taxation shown in the draft accounts to 30th June is $25,000,000.

  1. On 16th July 2022 the company’s premises situated close to the Murray River were flooded as the result of a freak storm. The company estimates that uninsured losses of $700,000 will arise ($400,000 stock loss and $300,000 damage to freehold property).

With reference to relevant audit standards, identify the business risk and outline any resulting potential audit risks that may require further investigation. 

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