You are a partner incharge of the audit for Bargin Ltd, a private company. The finishing of the audit report is pending for the income year 2018 and you have recorded some situations where possible action is required They are listed below: Bargin Ltd, carries its property, plant, and equipment accounts at current market values. Current market values exceed historical cost by a highly material amount, and the effects are pervasive throughout the financial statements. Management of Bargin Ltd, refuses to allow you to observe, or make, any counts of inventory. The recorded book value of inventory is highly material. You were unable to confirm accounts receivable with Bargin Ltd, customers. However, because of detailed sales and cash receipts records, you were able to perform reliable alternative audit procedures. One week before the end of fieldwork, you discover that the audit manager on the Bargin Ltd, engagement owns a material amount of Bargin Ltd, common stock. You relied upon another audit firm to perform part of the audit. Although you were the principal auditor, the other firm audited a material portion of the financial statements. You wish to refer to (but not name) the other firm in your report. You have substantial doubt about Bargin Ltd,’s ability to continue as a going concern. Bargin Ltd, changed its method of computing depreciation in 2017. You concur with the change and the change is properly disclosed in the financial statement footnotes. Ten days after the balance sheet date, one of Bargin Ltd,’s buildings was destroyed by a fire. Camo refuses to disclose this information in a footnote to the financial statements, but you believe disclosure is required to conform with GAAP. The amount of the uninsured loss was material, but not highly material. The available actions are outlined below: a) Issue a standard unqualified report. b) Qualify both the scope and opinion paragraphs. c) Qualify the opinion paragraph. d) Issue an unqualified opinion with an explanatory paragraph. e) Issue an unqualified opinion with modified wording (no explanatory paragraph). f) Issue an adverse opinion. g) Disclaim an opinion. Required: 1) make a table, for each scenario listed (1-8), showing the correct course of action (a-g) to be done. 2) referring to the data in this problem, differentiate between a qualified opinion, adverse opinion, and a disclaimer of opinion, and explain the circumstances under which each is suitable.
You are a partner incharge of the audit for Bargin Ltd, a private company.
The finishing of the audit report is pending for the income year 2018 and you have recorded some situations where possible action is required
They are listed below:
- Bargin Ltd, carries its property, plant, and equipment accounts at current
market values. Current market values exceed historical cost by a highly material
amount, and the effects are pervasive throughout the financial statements.
- Management of Bargin Ltd, refuses to allow you to observe, or make,
any counts of inventory. The recorded book value of inventory is highly
material.
- You were unable to confirm
accounts receivable with Bargin Ltd, customers.
However, because of detailed sales and cash receipts records, you were able to
perform reliable alternative
- One week before the end of fieldwork, you discover that the audit manager on
the Bargin Ltd, engagement owns a material amount of Bargin Ltd, common stock.
- You relied upon another audit firm to perform part of the audit. Although you
were the principal auditor, the other firm audited a material portion of the
financial statements. You wish to refer to (but not name) the other firm in your
report.
- You have substantial doubt about Bargin Ltd,’s ability to continue as a going
concern.
- Bargin Ltd, changed its method of computing
depreciation in 2017. You
concur with the change and the change is properly disclosed in the financial
statement footnotes.
- Ten days after the
balance sheet date, one of Bargin Ltd,’s buildings was destroyed
by a fire. Camo refuses to disclose this information in a footnote to the
financial statements, but you believe disclosure is required to conform with
GAAP. The amount of the uninsured loss was material, but not highly material.
The available actions are outlined below:
- a) Issue a standard unqualified report.
- b) Qualify both the scope and opinion paragraphs.
- c) Qualify the opinion paragraph.
- d) Issue an unqualified opinion with an explanatory paragraph.
- e) Issue an unqualified opinion with modified wording (no explanatory paragraph).
- f) Issue an adverse opinion.
- g) Disclaim an opinion.
Required:
1) make a table, for each scenario listed (1-8), showing the correct course of
action (a-g) to be done.
2) referring to the data in this problem, differentiate between a qualified opinion, adverse opinion, and a disclaimer of opinion, and explain the circumstances under which each is suitable.
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