Uranus Ltd has been very profitable. It recently received notice of a 10% price increase for a significant portion of its inventory. The company believes it is important to manage its products wisely and has a policy of writing all inventory up to current replacement cost. This ensures that profits will be recognised on sales sufficient to replace the assets and realise a normal profit. This operating philosophy has been very successful, and all salespeople reference current cost, not historical cost, in making sales. Only inventory has been written up to replacement cost, but inventory is material because the company carries a wide range of products. The companys policy of writing up the inventory and its dollar effects is adequately described in a foot note to the financial statements. For the current year, the net effect of the inventory write-up increased reported income by only 3%, and assets by 15% above historical cost.

(a)Indicate the type of audit opinion you would issue and give reasons for issuing the particular audit opinion.