Roofings Ltd deals in the manufacture of roofing and building materials. The company had an inventory figure of Shs 5 billion on its statement of financial position for the period ended 31 December, 2020. Your audit firm, PLT & Co, was appointed after 31December, 2020 and was unable to participate in the physical counting of the inventory.

You are have not been able to obtain sufficient appropriate audit evidence regarding inventory. The possible effects of the inability to obtain sufficient appropriate audit evidence are deemed to be material but not pervasive to the financial statements. Your junior has enquired on whether you are likely to issue a "qualified or un qualified opinion". Assuming you have concluded that this matter is material and that after the preparation of  by management some issues regarding inventory and other Assets like trade receivables, and some expenses were not considered when there were indicators that they would have an impact on Financials but management ignored.

 

 Required:

(a) With reference to question what ethical issues are identifiable from the  scenario and what recommendations would you put forward to management of CUUL to implement? 

(b) Draft a suitable independent auditor's report for Roofings Ltd.

(c) Explain on which basis would you have formed the report? 

(d)  Under what circumstances might your Audit firm, PLT & Co qualify the audit Opinion?      

(e)  With examples from the case study above, explain the categories of bussines Risks your client's business is likely to be exposed to.        

Answer rating: 100% (QA)

a Ethical issues that are identifiable from the scenario include the lack of independence of PLT Co as they were appointed after the statement of financial position was prepared and the lack of manage... View the full answer