You are the partner appointed to carry out a hot review of a couple of audits carried out by your firm, Surety LLP. Following are audit findings you have reviewed during the course of respective hot reviews. 

(i) Materiality for Younus & Co audit for the financial year ending 31 December 2020 is MVR 1million. The Company has got a loan that appears as MVR 10 million in the Statement of Financial Position, whilst the bank confirmed to the audit firm MVR 9.5 million. Younus & Co fails to explain the discrepancy. Younus and Co. has got a debtor that owes MVR 2 million that is experiencing financial difficulties. But, Younus & Co. argues that it is confident the money can still be recovered from the customer and refuse to provide an allowance for that in accounts. [4 marks] 

(ii) Financial statements’ materiality for the audit of Fruity Pvt. Limited for the financial year ending 31 December 2020 is MVR 400,000. Being an owner - managed business the company has got no adequate internal controls. Several misstatements have been identified on many areas in the audit, namely stock has been overstated by MVR 200,000 and Surety LLP has not been invited to observe the stock take. Revenue has a figure of MVR 100,000 that is not evidenced by sufficient and appropriate audit evidence.

A provision resulting from a litigation is not recognised in the financial statements, arguing that an appeal has been lodged with an appellate court. Included in the non-current assets is a software that cost MVR 50,000 that could not be used without a significant upgrading, as the software is now not compatible with the current operating system that the company use. Share Certificate for its share capital of MVR 1,000,000 is not to be found. No alternative procedure could give reasonable assurance that is actually the share capital, as the Memorandum of the Company is also missing. The Cash count has not been carried out at the end of the year, it amounts to MVR 87,653 in the financial statements. Also, the Company has not been registered for Business Profit Tax (BPT). [7 marks] 

(iii) Proppy pvt limited has prepared accounts to 31 December 2016, but failed to evidence the stock figure of MVR 1.5 million by way of stock records and stock take. Property plant and equipment of MVR 10 million is not supported by a fixed asset register, which forms 90% of the net worth of the Company. And now adequate system has been in place for recording revenue of the company. The materiality of the audit is MVR 1million.

Required
Suggest, justifying with reasons, an appropriate audit opinion that may be given for every audit.

Answer rating: 100% (QA)

i For Younus Co audit an adverse opinion should be given due to the material discrepancy i... View the full answer