Jones, CPA, has completed the audit of Sarack Lumber Supply Co.and has issued a standard unqualified report. In addition to a report on the overall financialstatements, the company needs a special audited report on three specific accounts: sales,net fixed assets, and inventory valued at FIFO. The report is to be issued to Sarack’s lessor,who bases annual rentals on these three accounts. Jones was not aware of the need for thereport on the three specific accounts until after the overall audit was completed.a. Explain why Jones is unlikely to be able to issue the audit report on the three specificaccounts without additional audit tests.b. What additional tests are likely to be needed before the report on the three specificaccounts can be issued?c. Assuming that Jones is able to satisfy all the requirements needed to issue the reporton the three specific accounts, write the report. Make any necessary assumptions.
Jones, CPA, has completed the audit of Sarack Lumber Supply Co.
and has issued a standard unqualified report. In addition to a report on the overall financial
statements, the company needs a special audited report on three specific accounts: sales,
net fixed assets, and inventory valued at FIFO. The report is to be issued to Sarack’s lessor,
who bases annual rentals on these three accounts. Jones was not aware of the need for the
report on the three specific accounts until after the overall audit was completed.
a. Explain why Jones is unlikely to be able to issue the audit report on the three specific
accounts without additional audit tests.
b. What additional tests are likely to be needed before the report on the three specific
accounts can be issued?
c. Assuming that Jones is able to satisfy all the requirements needed to issue the report
on the three specific accounts, write the report. Make any necessary assumptions.
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