Question

Assume you are an auditor and you are facing the following separate circumstances, the effects of all the items below are material: 1. A manufacturing company is currently negotiating with the bank an extension of a loan facility that is due for repayment shortly after the AGM; without this refinancing the business will not be able to continue operations. The director of the company agrees to make disclosure the indicating the extent of the problem the company is currently facing with the bank loan. After reviewing the information, you are satisfied that the disclosures are adequate. 2. The directors of a Telecommunications company refuse to give you access to reports of sales contracts they have received from government in relation to the Revenues recognised in their financial statements. REQUIRED Explain clearly the effect of each of the above circumstances on your auditor’s opinion and explain the actions of the auditor?

Answer 1

Auditor's Opinion:

Auditor's opinion is the  statement made by the auditor about the financial statement of the client. Auditors Opinion are of the following Types:

Unqualified Opinion: Auditors makes Unqualifed opinion if the clients financila statements are true and fair enough and proper disclosures to the financila statements have been made.

Qualified Opinion: If the auditor is unable to obtain the sufficient appropriate evidence to make the opinion on the financial statements which may be material but not pervasive.

Adverse Opinion: If the Auditor has the sufficient evidence that the financail statements contains the mistatements in the financial statements which are material and pervasive.

Disclaimer Opinion: If the auditor is unable to give any opinion on the financial statements because he does not have any information on the financial record or lack of cooperation by the client's to produce the information.

1) A manufacturing company wothput refinancing unable to continue its operations. It is related to Going concern issue. The company took a decision to diclose the materila facts regarding the going concern issue in its financial statements. As, the financial statements are of true and fair view providing the requires disclosures, an Unqualified Opinion is given by the auditor.The Auditor accepts the responsibility stating in the last paragraph.

2) Telecommunication company refuses to give access to reports of sales contracts received from government to the auditor. Hence the Auditor gives teh Disclaimer Opinion statting that the audit could not be completed due to lack of cooperation from the cliant's management as Discliamer and the auditor doesn not accepts any responsibility.