The following are three independent situations. For each case, state the type of audit opinion that should
Question:
The following are three independent situations. For each case, state the type of audit opinion that should be expressed and provide a brief explanation to justify your choice:
1. The auditors of Smith Ltd were refused access to six months of the minutes of the directors’ meetings (held monthly) because they contained discussions of a highly confidential matter. No alternative procedures could be performed
2. Due to the recent downturn in the Australian economy, Jones Ltd has made substantial losses for the last three quarters and now has a negative working capital balance. The auditor of Jones Ltd has concerns over the entity’s ability to continue as a going concern in the short to medium term. Management of the company believe that the company is fully solvent and have not disclosed these matters in the financial statements.
3. Brown Ltd has reported a net profit after tax of $5m, which represents an increase of 25% over the previous year. However, the Directors’ Report states the increase in net profit from the prior year is more than 40%. As the annual report has been printed, the directors are not prepared to correct the error.
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield