The property portfolio of Utopia Pty Ltd is stated at a value of $1 million in excess of its current market value. Utopia Pty Ltd is a non-reporting entity and does not apply the provisions of AASB 1010 in the preparation of its financial
Report. The directors believe that it would be inappropriate to write the properties down to market value as it is their
Intention to hold the properties as a long-term investment and the properties will eventually recover their value. The
Independent valuer agrees that the property will eventually recover its full value. Sufficient appropriate audit evidence
To support the value of the property would include obtaining a letter of representation from management confirming:
A) the directors' intention to hold the property on a long-term basis, that the value of the buildings is likely to increase in the long term and that the company is indeed a non-reporting entity.
B) the directors' intention to hold the property on a long-term basis and that the company is indeed a non-reporting entity.
C) the intention to hold the property on a long-term basis.
D) the company is indeed a non-reporting entity.

Question

Quizplus · Accepted Answer

While the intention to hold the property as a long-term investment and the status of being a non-reporting entity are relevant factors, the statement about the value of the buildings increasing in the long term is not supported by independent evidence and could be subjective. Therefore, option B is the most appropriate choice as it focuses on the relevant information and avoids introducing any potentially misleading statements.

The Property Portfolio of Utopia Pty Ltd Is Stated at a Value