Question

Consider the following individual circumstances. In each case, auditor has identified the following facts from his audit of the company as on the year ending 31 December 2019.

Required:

Identify what type of Audit opinion should opinion be expressed. With proper justification.

1.      While conducting the audit of the inventories, auditor is unable to attend the physical verification and count of the inventories amounted OMR 350,000. The auditor was tried to use the alternate method of count and verify the inventories but auditor unable to obtain the satisfied results.                                                                               (2.5 Marks)

2.      While performing the final audit of the company, the auditor observed that company has not followed the IFRS to prepare the financial statements.                    (2.5 Marks)

3.      Because of the covid-19 your client company shares are collapsed in the stock exchange and the company’s net assets are OMR 200 million. The financial reports for the year show a true and fair view of the financial position. (2.5 Marks)

4.      One of your client company is did not maintain the proper books of accounts records during the year because of non-availability of experienced accountant. The accounting records were not at all maintained first seven months of the financial year. An accountant was appointed by the company and he tried to prepare the books of accounts and reconstructed the records from the details available from the existing staff, the accountant has unable to prepare all the accounts properly and Auditor is not satisfied with the financial statements.                                                                            (2.5 Marks)

Answer 1

Solution:

Auditor can provide following opinion on Audit of financial Statement:

(a) Unqualified Opinion: An unqualified opinion is an independent auditor's judgment that a company's financial statements are fairly and appropriately presented, without any identified exceptions, and in compliance with generally accepted accounting principles (GAAP)

(b)Qualified Opinion: A qualified opinion is given when everything in financial statement is true and fair subject to a certain exception which is material but not pervasive.

(c) Adverse Opinion: A adverse opinion is given by auditor when auditor identify misstatement which is material and pervasive or there is threat on going concern of organisation.

(d) Disclaimer of Opinion: A disclaimer of opinion is given when there is substantial limitation on scope of work of Auditor and alternative procedure is not available.

In light of above, we will decide which opinion is appropriate in each instances

1. In first instance , auditor shall provide disclaimer of opinion because here auditor is not able to attend stock count nor alternative audit procedure.

2. Here auditor will provide Adverse opinion because client has not followed IFRS that means Financial statement does not showing true and fair view.

3. In the third instance auditor shall provide unqualified opinion because Financial statement is showing true and fair view.

4.Here auditor provide Adverse opinion because financial statement presented by management are nlot acceptable.