(c) In October 2004, Volcan commenced the development of a site in a valley of ‘outstanding natural beauty’ onwhich to build a retail ‘megastore’ and warehouse in late 2005. Local government planning permission for thedevelopment, which was received in Ap

(c) In October 2004, Volcan commenced the development of a site in a valley of ‘outstanding natural beauty’ on

which to build a retail ‘megastore’ and warehouse in late 2005. Local government planning permission for the

development, which was received in April 2005, requires that three 100-year-old trees within the valley be

preserved and the surrounding valley be restored in 2006. Additions to property, plant and equipment during

the year include $4·4 million for the estimated cost of site restoration. This estimate includes a provision of

$0·4 million for the relocation of the 100-year-old trees.

In March 2005 the trees were chopped down to make way for a car park. A fine of $20,000 per tree was paid

to the local government in May 2005. (7 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Volcan for the year ended

31 March 2005.

NOTE: The mark allocation is shown against each of the three issues.