Consider the following situations that might arise in the audit of the financial
ID: 2499496 • Letter: C
Question
Consider the following situations that might arise in the audit of the financial statements of a nonpublic company. Indicate the type of opinion(s) that would be issued and describe any other modification to the standard audit report that would result. Unless indicated otherwise, assume that material amounts are involved. When more than one opinion might be issued, explain when each is appropriate.
a. A company's inventory records were deficient and the auditor was required to satisfy herself that the inventory was properly stated using alternative procedures. She is satisfied that she has sufficient appropriate evidence.
Explanation / Answer
a)
The auditor should conduct the inventory valuation by conducting physical inventory audit. The auditor should Qualify in the audit report if he has obtained enough audit evidence that the inventory records are deficient. The same thing should be disclosed in the audit report.
The auditor should use alternative procedures to know the exact deficient and there by obtaining audit evidence that should satisfy him to make a qualified audit report.
Assuming the materiality aspect the audit report should be qualified by stating the facts in the audit report.