For this assignment, you will be given two sets of client circumstances, and you will need to determine the necessary steps for issuing a proper audit opinion. The questions are listed below.

When you are ready to submit answers, please begin the "Quiz". You will type your responses into the given boxes and then submit. You will be permitted to save answers and return to the assignment later, and there is no time limit once you begin. You are encouraged to have your thoughts prepared and explore the resources discussed in this lesson before constructing and submitting your responses.

Question 1

During the audit of Valley Corp., you determine that inventory may be misstated. Valley Corp. refuses to allow you to expand your procedures to make an actual determination regarding the misstatement.

1. Determine if the facts and circumstance require modification of the audit opinion.
2. Classify the misstatement as immaterial, material or highly material. If you cannot determine the appropriate classification, indicate the additional information needed.
3. Explain which audit opinion you would issue. If you have not concluded the level of materiality for item 2, explain the appropriate opinion for each level of materiality.

Question 2

The client has a fleet of trucks. In the past, trucks were purchased and capitalized. Beginning this year, the client has decided to lease the fleet vehicles. The accounting method has been changed to lease capitalization and the policy is fully disclosed in the footnotes.

1. Determine if the facts and circumstance require modification of the audit opinion.
2. Classify the misstatement as immaterial, material or highly material. If you cannot determine the appropriate classification, indicate the additional information needed.
3. Explain which audit opinion you would issue. If you have not concluded the level of materiality for item 2, explain the appropriate opinion for each level of materiality.