Question

Following are four possible scenarios that reflect scope limitations encountered by J. Bruce, CPA, during the audit of Weaver Inc. In all cases, assume that the ending balance in inventory is material to Weaver’s financial position, results of operations, and cash flows.
Scenario A. Because of the late appointment to the audit engagement, Bruce is unable to observe Weaver’s physical inventory for the year ended December 31, 2014. How-ever, Weaver maintains extensive perpetual inventory records, and Bruce has been able to perform other substantive procedures and is satisfied as to the fairness of the ending inventory balance for December 31, 2014.
Scenario B. Because of the late appointment to the audit engagement, Bruce is unable to observe Weaver’s physical inventory for the year ended December 31, 2014. Because Weaver’s accounting records are not complete, Bruce is unable to perform other substantive procedures and is not satisfied as to the fairness of the ending inventory balance for December 31, 2014.
Scenario C. Because of a direct request by Weaver’s management, Bruce did not observe Weaver’s physical inventory for the year ended December 31, 2014. However, Weaver maintains extensive perpetual inventory records, and Bruce has been able to perform other substantive procedures and is satisfied as to the fairness of the ending inventory balance for December 31, 2014.
Scenario D. Because of a direct request by Weaver’s management, Bruce did not observe Weaver’s physical inventory for the year ended December 31, 2014. Weaver’s accounting records are not complete, so Bruce is unable to perform other substantive procedures and is not satisfied as to the fairness of the ending inventory balance for December 31, 2014. Required: For each of these scenarios, indicate what reporting option(s) and factors Bruce should consider in deciding which type of opinion to issue in the circumstances. (Do not draft Bruce’s report on Weaver Inc.’s financial statements for the year ended December 31, 2014.)




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  • CreatedOctober 27, 2014
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