Question 2 (9 marks) Required: For each of the following independent scenarios a) Indicate the type...

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Question 2 (9 marks) Required: For each of the following independent scenarios a) Indicate the type of auditor's report to be issued b) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued Your response MUST be written in the table below. Anything outside will NOT be graded Scenario 1 Popcom Supply Inc. (PSI), a publicly listed entity, has a material unsecured loan receivable balance owing from Candy Supply Ltd. (CSL). PSI has an October 31" year end. CSL declared bankruptcy on November 30th, 2021. The auditors completed their field work for the audit of PSI on December 15th and it is the auditors' judgement that the loan receivable is impaired and should be written down. Management of PSI disagree with this assessment and have refused to write-off the debt. PSI is otherwise a profitable entity and the future outlook for the company is positive as it has recently secured 4 new customers. Indicate the type of audit report to be issues (1 mark) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued (2 marks) Scenario 2 Yummy Chocolate Inc (YCI) is a private family owned specialty chocolate company that prepares seasonal treats and sells them through booths located in large shopping malls. There are 3 booths that are each operated by one of the family members. The company only accepts cash as a means of payment from customers. Internal controls among the 3 booths have not been adequately designed and each operator have created their own unique processes. Indicate the type of audit report to be issues (1 mark) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued (2 marks) Scenario 3 Construction Co Inc. (CCI) is a private company that expects significant material losses related to several long-term contracts in progress. CCI has not appropriately recorded the expected losses nor made any of the appropriate disclosures. The losses are due to significant increases in material costs for which CCI does not have control. The expected losses if recognized would have the effect of changing a positive net income before taxes to a material loss before taxes. If the losses were recognized, the current ratio would fall to 0.5 to 1. CCI is currently in negotiations with the union and has plans to lay off one third of its employees. Indicate the type of audit report to be issues (1 mark) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued (2 marks) Question 2 (9 marks) Required: For each of the following independent scenarios a) Indicate the type of auditor's report to be issued b) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued Your response MUST be written in the table below. Anything outside will NOT be graded Scenario 1 Popcom Supply Inc. (PSI), a publicly listed entity, has a material unsecured loan receivable balance owing from Candy Supply Ltd. (CSL). PSI has an October 31" year end. CSL declared bankruptcy on November 30th, 2021. The auditors completed their field work for the audit of PSI on December 15th and it is the auditors' judgement that the loan receivable is impaired and should be written down. Management of PSI disagree with this assessment and have refused to write-off the debt. PSI is otherwise a profitable entity and the future outlook for the company is positive as it has recently secured 4 new customers. Indicate the type of audit report to be issues (1 mark) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued (2 marks) Scenario 2 Yummy Chocolate Inc (YCI) is a private family owned specialty chocolate company that prepares seasonal treats and sells them through booths located in large shopping malls. There are 3 booths that are each operated by one of the family members. The company only accepts cash as a means of payment from customers. Internal controls among the 3 booths have not been adequately designed and each operator have created their own unique processes. Indicate the type of audit report to be issues (1 mark) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued (2 marks) Scenario 3 Construction Co Inc. (CCI) is a private company that expects significant material losses related to several long-term contracts in progress. CCI has not appropriately recorded the expected losses nor made any of the appropriate disclosures. The losses are due to significant increases in material costs for which CCI does not have control. The expected losses if recognized would have the effect of changing a positive net income before taxes to a material loss before taxes. If the losses were recognized, the current ratio would fall to 0.5 to 1. CCI is currently in negotiations with the union and has plans to lay off one third of its employees. Indicate the type of audit report to be issues (1 mark) Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued (2 marks)

Answer rating: 100% (QA)

For Scenario 1 Scenario 1 Type of Auditors Report Justification Scenario 1 Qualified Opinion The auditors should issue a qualified opinion This is bec... View the full answer