During the audit, the audit firm discovers that the client has charged goodwill and intangible assets...

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During the audit, the audit firm discovers that the client has charged goodwill and intangible assets directly to retained earnings, when GAAP requires that that these intangibles should be recorded as assets and amortized over future periods. If intangibles were capitalized, it would have increased assets by $400,000 and increased net income by $360,000, figures that are considered MATERIAL to the Company's financial statements. Management does not agree with auditors assessment and is therefore not making any adjusting entries to correct it. What type of audit report should be issued and why? During the audit, the audit firm discovers that the client has charged goodwill and intangible assets directly to retained earnings, when GAAP requires that that these intangibles should be recorded as assets and amortized over future periods. If intangibles were capitalized, it would have increased assets by $400,000 and increased net income by $360,000, figures that are considered MATERIAL to the Company's financial statements. Management does not agree with auditors assessment and is therefore not making any adjusting entries to correct it. What type of audit report should be issued and why?

Answer rating: 100% (QA)

Based on the given information the client has violated the Generally Accepted Accounting Principles ... View the full answer