Question

the following re three indepenedent situation for each case state the type of audit opinion that should be expessed and provide a brief explanaton to justify your choice

a) the auditors of howlieltd were refused access to six months of the minutes of the directors meeting because they contained discussions of a highly confidential matter. no alternatie procedures could be performed.

b) due to the recent downturn in the austraklian economy, scarlowie ltd has maae substantial lossess or three qurters and now has a negative working capital balance. the auditorof that company hs concerns over the entitys ability to continue as a going concern in the short medium term. mgmt og that copany beleive that company is fully solvent and have not disclose this matters in the financial statements.

c)colarge ltd has reported aa net profit after tax of $5m which represents an increase of 25% oer the previous yea. however,the directors report states that inccrease in net profit from the prior year is more than 40%. as the annuaal repot has been printed,the directors are not prepared to correct the errror

Answer 1

ques 1
Disclaimer of opinion-Due to limitation of auditors work

As the auditor is responsible to express opinion on fincancial statements and because of not able to accessing minuutes of the meetins he is not able to obtain sufficient apporpriate audit evidence to provide a basis for an audit opinion
Also the matter is looks so important , it is therefore necessary to be recorded in the books of accounts by the management , but has not been recorded , also for justifiaction of not reocrding in the books , auditor is not able to perform alternate audit procdures to be able to express opinion

Ques 2
Adverse opinion:
if the financial statements have been prepared usiing going convern basis of accoutning but in auditrs judgement management's use of the going concern basis of accounting in the financial statements is inappropirate the auditor is to express an adverse opinion regardless whether or not the financial statements include the disclosure of the inappropriateness of management;s use of the going concern basis of accounting

Ques 3

Qualified or adverse opinion

The actions the auditor takes if the other information is not corrected after
communicating with those charged with governance are a matter of the auditor’s professional judgment. The auditor may take into account whether the rationale given by management and those charged with governance for not making the correction raises doubt about the integrity or honesty of management or those charged with governance, such as when the auditor suspects an intention to mislead. The auditor may also consider it appropriate to seek legal advice