The staff at Nguyen and Partners have completed the necessary audit work for Manitoba Metal Fabricators. The partner responsible for the audit is now reviewing the audit file. She has come across the Schedule of Unadjusted Differences and is considering the type of audit report to issue. Referring to figure 12.2, answer the following:
Required
(a) If overall materiality for the engagement were set at $50,000, what type of audit report would be issued? Why?
(b) If overall materiality for the engagement were set at $100,000, what type of audit report would be issued? Why?
(c) Why does the current year Schedule of Unadjusted Differences include entries from the prior year? Explain the impact these entries have on the current year financial statement balances.