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Required: For each of the above events, state the appropriate action (if any) that the auditor would require of the client in order to issue an unqualified audit opinion. Give reasons.

Required: For each of the above events, state the appropriate action (if any) that the auditor would require of the client in order to issue an unqualified audit opinion. Give reasons.

FINANCIAL ACCOUNTING
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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Solve the following question.

 

OPSM Opticians Ltd is a producer of fashion eyewear. The audit report for the year ended 30 June 20X9 was signed on 5 August 20X9 and along with the financial report was mailed to shareholders on 10 August. Consider the following independent events. Assume that each event is material. I. On 5 July, OPSM Opticians entered into a new contract to supply eyewears to JDS, a new major department store. The contract was similar in nature to other contracts previously negotiated. II. OPSM Opticians has invested significant funds in developing a new type of unbreakable sunglass lens. On 8 July, OPSM Opticians applied for a patent for the lens, only to discover that a competitor had lodged a similar application on 20 June. The granting of Trendy Accessories' application is now in serious doubt. III. Internal audit has uncovered a major fraud at one of OPSM Opticians branches. The fraud was perpetrated by two senior staff, acting in collusion over a number of years. The internal auditors released their report to management on 15 July, after a highly confidential investigation spanning several months. IV. One of OPSM Opticians major customers, Leisure Pty Ltd, suffered a fire on 20 July. Since Leisure Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. V. On 25 July, a well-known financial planner advised his clients not to invest in OPSM Opticians due to poor long-term growth prospects. The market price for OPSM Opticians shares subsequently declined by 40%. Required: For each of the above events, state the appropriate action (if any) that the auditor would require of the client in order to issue an unqualified audit opinion. Give reasons. English (United States) DFocus arch
Transcribed Image Text:OPSM Opticians Ltd is a producer of fashion eyewear. The audit report for the year ended 30 June 20X9 was signed on 5 August 20X9 and along with the financial report was mailed to shareholders on 10 August. Consider the following independent events. Assume that each event is material. I. On 5 July, OPSM Opticians entered into a new contract to supply eyewears to JDS, a new major department store. The contract was similar in nature to other contracts previously negotiated. II. OPSM Opticians has invested significant funds in developing a new type of unbreakable sunglass lens. On 8 July, OPSM Opticians applied for a patent for the lens, only to discover that a competitor had lodged a similar application on 20 June. The granting of Trendy Accessories' application is now in serious doubt. III. Internal audit has uncovered a major fraud at one of OPSM Opticians branches. The fraud was perpetrated by two senior staff, acting in collusion over a number of years. The internal auditors released their report to management on 15 July, after a highly confidential investigation spanning several months. IV. One of OPSM Opticians major customers, Leisure Pty Ltd, suffered a fire on 20 July. Since Leisure Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. V. On 25 July, a well-known financial planner advised his clients not to invest in OPSM Opticians due to poor long-term growth prospects. The market price for OPSM Opticians shares subsequently declined by 40%. Required: For each of the above events, state the appropriate action (if any) that the auditor would require of the client in order to issue an unqualified audit opinion. Give reasons. English (United States) DFocus arch
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