Question

1.Nortel Networks experienced one of the most notorious Canadian bankruptcies. Eventually there was a distribution of funds obtained from selling off Nortel’s assets, including intellectual property. Former Nortel employees eligible to receive pensions made up one of the major groups seeking relief from the court. Would those entitled to pension funds have been secured or unsecured creditors in the bankruptcy?

2.Dedrisan Inc. has experienced an unusually large loss from which it is very unlikely to recover. It is in default on some debt covenants. The auditor of the company concludes that Dedrisan is no longer a going concern. Management has requested the auditor issue an auditor’s report on the financial statements for the current year. The financial statements have been prepared using the historical cost principle and do not reflect any adjustments to the assets or any disclosure of the loan defaults. The auditor informs Dedrisan that, under the current financial statement presentation, an adverse audit opinion would be issued. Without the necessary adjustments and disclosure, the financial statements taken as a whole are not in accordance with GAAP. Once issued, the adverse opinion could lead to the bankruptcy of Dedrisan Inc.

What measures, if any, can Dedrisan Inc. take to obtain an unmodified opinion from the auditor?

Answer 1

DEDRISAN Inc Can take a 44AD with ISA 700 :

The Opinion is issued once auditors obtain suffiient and appropriate audit evidence to the financial statements as the result of their testing.. All material respect here means there is no material misstatement in the financial statements, but there might be an immaterial misstatement.

The unmodified consolidated audit report is a useful document for making a decision. Currently, the form and content of this report are defined by the International Standard for Auditing ISA 700. The comprehensibility of the independent auditor's report is a qualitative characteristic that can condition the satisfaction of users' needs in the consolidated financial statements. These users require readable reports to facilitate the interpretation of financial statements. The public is also looking for legible audit information to enhance the quality of financial disclosures.