During the audit planning for your client Shang Ltd for the year ending 30 April 2013, you read the following comment on the ‘points forward for next year’ schedule included in last year’s audit working papers file:
‘During the course of our audit we discovered that the company had incorrectly reclaimed input value added tax totalling $42,000. We have notified the client in writing of the need to repay this amount to tax authority as soon as possible. The financial statements have been adjusted to include this sum within current liabilities as ‘amounts payable to Tax Authority’.
Included within income in the company’s management accounts for the ten months ended 28 February 2013 is a credit entry for $42,000 described as ‘VAT difference written off’.
Which one of the following actions is LEAST likely to be taken in respect of this matter?
A . Report to nominated officer/money laundering officer within the firm
B . Report to board of directors
C . Avoid tipping off the client
D . Consider resignation
Answer: B
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