Consider the following separate cases pertaining to Audit Opinions:

(a) You have audited Froggy No 1 Ltd. During the audit you discover that a material amount of inventory is held in a robotic storage facility. Management advise that due to the dangers to untrained individuals, they are not willing to provide you with access to the inventory. You are however permitted to send an inventory expert to the location. You select an expert and he visits the site, and returns convinced that the inventory is correctly stated. 

(b) You discover during your audit of Froggy No 1 Ltd that management are not amortizing the goodwill component of the purchase of Froggy No 27 Ltd., and its associated trademarks. Management state that this would not reflect reality as the writing off of what would amount to 12% of profit each year would be absurd, considering the trademarks are worth far more than Froggy No 1 Ltd. Paid for them in brand loyalty.

(c) During your Audit of Froggy No 1 Ltd you become aware of a research and development facility that has received material financial support from the company. You are simply refused access on the grounds that it would not be in the national interest.

(d) During your audit of Froggy No 1 Ltd. You discover that the major asset, a city office block has been affected by the downturn in the property market. The result is that the building is worth materially less than the book value. While rental income is still adequate to meet liabilities, the organization in fact would have a negative capital position if the building was valued at net realisable value in the accounts. Management will not change the valuation figure, which they state was a fair valuation on the date the valuation was undertaken. 

Required:Consider each case separately. For each case on audit opinions, set out the effect on your audit report, giving reasons.

Answer rating: 100% (QA)

ADue to the logistical issue the auditor cannot visit the location to check Froggys inventory manage... View the full answer