Answered: Question 3 Garret & Brown CPAs has been…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 3 Garret & Brown CPAs has been in business for over twenty years and has served as the auditors for several companies over the years. Garret and Brown's CPAs manage to retain their audit clients through the high-quality work they perform and the issuing of reports that are appropriate. The firm knows audit reports are essential to audit and assurance engagements because they communicate the auditors' findings. However, recently the firm has been experiencing some challenges in the preparation of reports for some of their audit clients. An audit report prepared by Garrett and Brown, CPAs, is provided below. The audit for the year ended December 31, 2019 was completed on March 1, 2020, and the report was issued to Javlin Corporation, a private company, on March 13, 2020. A. In keeping with a standard unqualified report, highlight the deficiencies in the above report, and make recommendations for how it is to be improved. We have examined the accompanying financial statements of Dalton Corporation as of December 31, 2019. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with generally accepted accounting principles. Those principles require that we plan and perform the audit to provide reasonable assurance about whether the financial statements are free of misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, except for the effects of not capitalizing certain lease obligations that should be capitalized in order to conform with generally accepted accounting principles, the financial statements referred to above present accurately the financial position of Jacob Corporation as of December 31, 2020, in conformity with international Financial Reporting Standards and comply with the provision of the Jamaican companies Act. Garrett and Brown, CPAs March 13, 2020 ACCT4702 21/01 The Council of Community Colleges of Jamaica Page 6 B. Several conditions would warrant an auditor modifying or deviating from a standard unqualified audit opinion. Garrett & Brown CPAs work on the following engagements. ▪ The auditors were unable to attend a physical count of inventory that totalling $500000 but was satisfied by other means of their existence and conditions ▪ Rapid Dollar Hardware is a small internet-based company created to sell home hardware supplies online. A downturn in e-commerce retailing has negatively affected the company. The company's sales and cash position have deteriorated significantly, and the auditors on the engagement have reservations about the ability of the company to continue in operations for the next year. ▪ The audit of Johnson Department Store was completed, and in the auditor's opinion, the financial statements are fairly presented. On the last day of the fieldwork, it was discovered that one of Garret & Brown's supervisors on the audit team was holding a material investment in Johnson. For each of the independent situation above, you need to decide: i. Discuss the situations that give rise to a departure from a standard unqualified report. ii. Recommend the type of audit report to be issued in each of the above situations and identify the nature of the matter that gives rise to that type of audit report you have recommended.

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