Nouri, CPA, has completed the audit of the financial statements of EwingCorporation, a construction company, as of and for the year ended March31, 2021. Nourialso audited and reported on the Ewingfinancial statements for the prior year. Nouri’s office is located in Lawrenceville, NJ. For the most recent audit, Nouricompleted all significant fieldwork on May18, 2021and issued the audit report on May25, 2021.The following information were noted during the audit of 3/31/2021:1.Ewingis a non-issuer.2.Ewingis presenting comparative financial statements.3.Ewingdoes not wish to present a statement of cash flow for either year.4.During the physical year ended 3/31/2021, Ewing

changed its method of accounting for long-term construction contracts and properly reflected the effect of the change in the current year’s financial statements and restated the prior year’s statements. Nouriis satisfied with Ewing’s justification for making the change. The change is discussed in footnote 11 of notes to the financial statements as follows:

The Company changed its method of accounting from long-term construction contracts during year ended March31, 2021. The Company properly reflected the effect of change in the current year’s financial statement and restatedthe prior year’s statements.

Nouriwas unable to perform normal accounts receivable confirmation procedures, but alternative procedures were used to satisfy Nourias to the existence of the receivables.6.Because of the restriction imposed by the State of NJ for conducting business in moths of April through June 2020, Ewing’s revenue dropped from $20.7 million to $12.5 million,and the company suffered a $2.1 million loss for the year ended 3/31/2021. Ewing believes if a newwave of Covid-19 starts in Fall 2021 and it cannot conduct business as usual, it may affect its going concern.The financial statements of Ewing Corporation for the year ended March 31, 2021 is prepared assuming going concern. The going concern issue have been properly disclosed in footnote 12 of the financial statements as follows: oBecause of the restriction imposed by the State of NJ for conducting business in the months of April through June 2020, Ewing’s revenue dropped from $20.7 million to $12.5 million and the company suffered a $2.1 million loss for the year ended 3/31/2021. Ewing believes if a new wave of Covid-19 starts in Fall 2021 and it cannot conduct business as usual, it may affect its going concern. If this happens, the company needs $1.4 million additional capital that could be financed through the company’s line of credit from Wells Fargo bank. EwingCorporation is the defendant in a litigation, the outcome of which is highly uncertain. If the case is settled in favor of the plaintiff, Ewingwill be required to pay a substantial amount of cash, which might require the sale of certain fixed assets. The litigation and the possible effects have been properly disclosed in footnote 10of the financial statements as follows:

The Company is a defendant in a litigation, the outcome of which is highly uncertain. If the case is settled in favor of the plaintiff, the Company will be required to pay a substantial amount of cash, which might require the sale of certain property, plant, and equipment. Nevertheless, it is at least reasonably possible that such an effect will occur, although the amount cannot be estimated.

Prepare the appropriate audit report based on the above information(See syllabus for more details).

Answer rating: 100% (QA)

Step 1 of 8 A a Audit Report Standard unqualified audit report with modified wording would be issued ... View the full answer