Use the accompanying solution sheet to reply to the eight situations below that relate to the audit
Question:
Use the accompanying solution sheet to reply to the eight situations below that relate to the audit of financial statements of nonpublic companies. Unless indicated otherwise, assume that material amounts are involved. Situations:
1. A company has departed from GAAP but the departure is not material.
2. A company's inventory records were deficient and the auditor was required to satisfy herself that the inventory was properly stated using alternative procedures. She is satisfied that she has sufficient appropriate evidence.
3. In auditing a client, an auditor has determined that substantial doubt exists about an entity's ability to continue as a going concern. The client has appropriately disclosed this matter.
4. A company changes from FIFO to LIFO for inventory valuation and the auditor concurs with the change. The change has a material effect on the comparability of the entity's financial statements this year, but is expected to have an immaterial effect in the future.
5. A client has changed its estimate of likely doubtful accounts from 2% of credit sales to 3%. The auditor believes the change to be reasonable.
Reply as to the type of opinion and other modification to the audit report as follows:
Types of opinion
A. Adverse
B. Disclaimer
C. Qualified
D. Unqualified
Other Modifications:
EOM Add an emphasis of matter paragraph
OM Add other matter paragraph
BFM Add a basis for modification paragraph
OTHER Make modification other than adding an additional paragraph
NONE Make no modifications
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley