Question

In: Accounting

Tod Brooker, a registered company auditor, has completed the audit of the financial report of Mayfair...

Tod Brooker, a registered company auditor, has completed the audit of the financial report of Mayfair Ltd for the year ended 30 June 2018. Mike also audited the financial report for Mayfair for the previous financial year. He drafted the following report for 30 June 2015:

We have audited the statement of financial position, income statement, statement of cash flows and statement of changes in equity for Mayfair Ltd as of 30 June 2018. Our audit was made in accordance with an applicable financial reporting framework. In our opinion, the above-mentioned financial statements are accurately and fairly presented in accordance with generally accepted accounting principles in effect at 30 June 2018.

Tod Brooker, CA

20 August 2018

Other information:

During the year, Mayfair changed its method of accounting for long-term construction contracts. It properly reflected the effects of the change in the current year's financial statements and restated the previous year's statements. Tod is satisfied with Mayfair's justification for making the change. The change is discussed in Note 20 to the financial statements.

Tod was unable to perform normal accounts receivable confirmation procedures, but he used alternative procedures to satisfy himself as to the validity of the receivables.

Mayfair is the defendant in a litigation case, of which the outcome is highly uncertain. If the case is settled in favour of the plaintiff, Mayfair will be required to pay a substantial amount of cash that may require the sale of certain non-current assets. The litigation and possible effects have been properly disclosed in Note 22 to the financial statements.

Required

(a) Consider all the above facts and the pertinent requirements of ASA 700 (ISA 700), and then rewrite the auditor's report in an acceptable and complete format, incorporating any necessary departures from an unmodified report.

(b) Identify any items included in the 'Other information' section that would not affect the auditor's report. Explain why this is the case.

Solutions

Expert Solution

Answer to a:

Auditors Report

We have audited the statement of financial position, income statement, statement of cash flows and statement of changes in equity for Mayfair Ltd as of 30 June 2018. Our audit was made in accordance with an applicable financial reporting framework. In our opinion, the above-mentioned financial statements are accurately and fairly presented in accordance with generally accepted accounting principles in effect at 30 June 2018.

Other Matter Paragraphs:

After the year end, there were change in method of accounting for long term construction contracts for which Mayfair Ltd had properly reflected the changes in the current financial statements & restated the previous year financial statements. Also, there was a ligation case towards the Mayfair Ltd in which they have to substantial amount of cash by selling noncurrent assets for which effect is properly disclosed by Mayfair Ltd in Note 22 of Financial Statements.

Answer to b:

Both Items will not change the Auditor’s Report but we have to disclose the Other information in the Audit Report. Because it is having substantial changes in the items of Balance sheet & Profit & Loss Account of Mayfair Ltd.


Related Solutions

The following is an audit procedure that an auditor performs relating to the financial report audit...
The following is an audit procedure that an auditor performs relating to the financial report audit of a client. Identify the broad category of audit test that is performed for the audit procedure. (Hint: The possible answers would include test of control, substantive test of ..., etc.) Examine creditor statement reconciliation for a sample of suppliers with whom the client had done business during the year
The following is an audit procedure that an auditor performs relating to the financial report audit...
The following is an audit procedure that an auditor performs relating to the financial report audit of a client. State the most appropriate assertion which is being tested by the audit procedure. Note: No marks will be given if more than one category of assertion is answered. Examine a sample of duplicate sales invoices to determine whether each one has a shipping document attached.
AS 3101: The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an...
AS 3101: The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion Spring 2018 In June 2017, Public Company Accounting Oversight Board (PCAOB) issued Auditing Standard (AS) 3101, “The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion”, as an effort to harmonize auditor’s report with International Standard of Auditing (ISA) 700 (revised), “Forming an Opinion and Reporting on Financial Statements”, issued by the International Auditing and Assurance...
Auditor Firm XYZ has just submitted a proposal to audit the financial statements of Company X....
Auditor Firm XYZ has just submitted a proposal to audit the financial statements of Company X. The auditor gained permission from the Company to have a discussion with the predecessor auditor. The predecessor auditor stated that they tended to have a high amount of disagreements with management. The auditing firm won the engagement and signed an engagement letter to complete the year-end audit. Company X is operating in a highly regularized sector and has a complex network of related entities...
Audit Planning - Purchases Transaction Cycle The internal auditor of Book Worm has just completed the...
Audit Planning - Purchases Transaction Cycle The internal auditor of Book Worm has just completed the annual planning meeting of the Audit Committee and has agreed to the following objectives for the following financial year: To coordinate a review of the Purchasing and Accounts Payable functions, which will complement the external auditor's review of trade creditors and accrued charges. To perform an operational audit of the Purchasing function. To perform a review of inventory levels and the identification of the...
Audit Planning - Purchases Transaction Cycle The internal auditor of Book Worm has just completed the...
Audit Planning - Purchases Transaction Cycle The internal auditor of Book Worm has just completed the annual planning meeting of the Audit Committee and has agreed to the following objectives for the following financial year: To coordinate a review of the Purchasing and Accounts Payable functions, which will complement the external auditor's review of trade creditors and accrued charges. To perform an operational audit of the Purchasing function. To perform a review of inventory levels and the identification of the...
Audit Planning - Purchases Transaction Cycle The internal auditor of Book Worm has just completed the...
Audit Planning - Purchases Transaction Cycle The internal auditor of Book Worm has just completed the annual planning meeting of the Audit Committee and has agreed to the following objectives for the following financial year: To coordinate a review of the Purchasing and Accounts Payable functions, which will complement the external auditor's review of trade creditors and accrued charges. To perform an operational audit of the Purchasing function. To perform a review of inventory levels and the identification of the...
What are the different types of an audit report that an auditor can issue? Choose a...
What are the different types of an audit report that an auditor can issue? Choose a type of opinion, other than unmodified/unqualified, and explain a condition that may lead to that opinion.
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial...
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. The auditor considers audit risk when planning and performing an examination of financial statements in accordance with auditing standards. In connection with this, the auditor considers the relevant assertion level because this directly assists the auditor to plan the appropriate audit procedures for those transactions, accounts or disclosures. The auditor uses the audit risk model as a framework for assessing...
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial...
Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. The auditor considers audit risk when planning and performing an examination of financial statements in accordance with auditing standards. In connection with this, the auditor considers the relevant assertion level because this directly assists the auditor to plan the appropriate audit procedures for those transactions, accounts or disclosures. The auditor uses the audit risk model as a framework for assessing...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT