Question

During the course of his audit of the financial statements of a corporation for the purpose of expressing an opinion on the​ statements, a CPA is refused permission to inspect the minutes of board of​ directors' meetings that document significant decisions of the board. The corporation secretary instead offers to give the CPA a certified copy of all resolutions and actions involving accounting matters.

a. State the condition (either change in accounting principle, failure to follow GAAP, none, reporting involving other auditors, or scope of the audit has been restricted)

b. State the materiality level (either Material, immaterial, highly material, material or highly material, or not applicable)

c. List any additional information needed (either amount of loss, auditor's preliminary judgement, client explanation in a memo, or the size of the misstatement)

Answer 1

a. Scope of the audit has been restricted

The right of the CPA also includes inspecting of financial books maintained by the company , that is, minutes of directors' meeting . It is for the CPA to decide which books are important and which are not. He has the right to inspect minutes of board. To form an opinion on the financial statements the CPA needs to ensure that any material decisions are taken by the board in their meeting. The company has no right to restrict the CPA.

b. The materiality level may be material or highly material. To ensure the appropriate materiality level, the CPA needs to verify the matters discussed in the minutes of board meeting.

c. Client explanation in a memo

Client's explanation regarding restriction to inspect CPA minutes of directors' meeting is needed. When there is an explanation and the CPA feels satisfactory he expresses an opinion which is limited to the restriction.