The property portfolio of Land Pty Ltd (Land) is stated at a value of $1 million in excess of its current market value.Land is a non-reporting entity and does not apply the provisions of AASB 116 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.An independent valuer has advised the auditor 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' belief that the value of the buildings is likely to increase in the long term.
B)the directors' intention to hold the property on a long-term basis.
C)the company is a non-reporting entity.
D)None of the given answers is correct.

Question

Quizplus · Accepted Answer

Obtaining a letter of representation from management confirming the directors' intention to hold the property on a long-term basis would provide evidence supporting their decision not to write down the value to market value. It shows that the intention is to hold the property for the long term and recover its value eventually. Option A is not necessary as the opinion of the directors on the value of the buildings is already known. Option C is not relevant as it does not provide any evidence about the value of the property. Option D is not correct as option B is the best choice.

The Property Portfolio of Land Pty Ltd (Land) Is Stated