Question

In: Accounting

Several independent audit or review situations are presented below. Assume that everything other than he situation...

Several independent audit or review situations are presented below. Assume that everything other than he situation described would have resulted in an unqualified opinion on the company’s financial report.

a. The client will not allow the auditor to view the minutes for the entire year under audit and beyond.

b. The auditor finds that the firm is not independent of the client on the last day of fieldwork.

c. The client declines to include a statement of cash flow in the financial report.

d. The client fails to record an immaterial amount of insurance paid in advance as an asset.

Required: For each of the above independent situations, determine the type of opinion that will most likely be issued by the firm auditing the financial statements.

Solutions

Expert Solution

A. Management is obliged to provide the books on the request on auditor.
Books include minutes of the meeting.

When access to the books is denied auditor can qualify the opinion in the audit report.

B. As per the code of ethics, auditor is required to be maintain independence both in mind and appearance. Auditors independence from the entity safeguards the auditors ability to form an opinion without being affected by influences that might compromise that opinion. It enhances auditors abitlity to act with integrity, to be objective and to maintain an attitude of professional scepticism.

Hence expressing an opinion is against code of ethics.

C. Auditor is required to express an opinion on the financial statements as a whole. FS include Balance sheet, PL account, Cash flow statement and Disclosures.

Hence CFS should be included. If the CFS is not included auditor can express a Qualified opinion.

4. Since the amount is immaterial it doesn't affect the mind of the readers hence Audit report need not be qualified.


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