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During the audit of LDF Co’s bad debt provision, the auditor discovered that £500,000 of costs included in the provision did not meet the criteria for inclusion based on the applicable accounting standards. The management of LDF suggested that no adjustment is required as the provision is a matter of judgement and the current provision is deemed reasonable by the management. Requirement: 1. Discuss the differences between the modified and unmodified audit reports.  2. Discuss the above issue and describe the impact of this issue on the auditor’s report, if any, should this issue remain unresolved.

During the audit of LDF Co’s bad debt provision, the auditor discovered that £500,000 of costs included in the provision did not meet the criteria for inclusion based on the applicable accounting standards. The management of LDF suggested that no adjustment is required as the provision is a matter of judgement and the current provision is deemed reasonable by the management. Requirement: 1. Discuss the differences between the modified and unmodified audit reports.  2. Discuss the above issue and describe the impact of this issue on the auditor’s report, if any, should this issue remain unresolved.

Auditing: A Risk Based-Approach to Conducting a Quality Audit
Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter15: Audit Reports On Financial Statements
Section: Chapter Questions
Problem 26MCQ
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During the audit of LDF Co’s bad debt provision, the auditor discovered that £500,000 of costs included in the provision did not meet the criteria for inclusion based on the applicable accounting standards. The management of LDF suggested that no adjustment is required as the provision is a matter of judgement and the current provision is deemed reasonable by the management.

Requirement:

1. Discuss the differences between the modified and unmodified audit reports. 

2. Discuss the above issue and describe the impact of this issue on the auditor’s report, if any, should this issue remain unresolved.

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