Question

Your firm has been appointed as the new auditor for Muscat Repair Services, a small company which has been operating for only a year and half. Your team was assigned to do the company’s very first audit examination. As the audit progresses, your team found it very difficult, as the client did not maintain appropriate financial records. The financial records were not updated for the first 9 months of the year because Muscat Repair Services has on and off bookkeepers during this period. You were told that they cannot find a permanent bookkeeper at that time, so only part-time bookkeepers were
recording for the company. A permanent bookkeeper, who was employed only nearing the end of the year, tried to reconstruct records from the details of incomplete receipts and payments available. The
bookkeeper was not able to reconcile the bank accounts, and your team is not satisfied that all transactions that occurred during the year are included in the financial statements. Moreover, some assets like furnitures, fixtures, equipment were not included in the records. The operating income recorded by Muscat Repair Services in the current year is OMR 10,250, far from the expected amount reconstructed by the auditors which is OMR 20,000.
Required: Explain your answer to the following questions:
1. Based on the given situation, write your reasons if the auditor can form his opinion on the financial
statements? Formulate your answer based on ISA 200 and ISA 700 concepts.
2. What are the key decision points that could be obtained by the auditor from the case in forming his
opinion? Determine the appropriate auditor’s opinion to be included in the auditor’s report whether
Unmodified Opinion or Modified Opinion. Justify your decision.

Answer 1