Auditing - 2225895-Farrah Schechter – Torres – Auditing...

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Unformatted text preview: 2225895-Farrah Schechter – Torres – Auditing –Assignment 1Assignment Problem 3-241a) The deviation for which the conditions require an unqualified standard report is the fact that a plant of the clients burnt down in a fire causing major damage and that the insurance won’t reimburse the client for their loss.b) The materiality level required is material and pervasive as the statements are completely misleading. Since the statements do not disclose anything about the loss this will effect the decisions made by users of the financial statements. c) The auditor’s report that should be issued is an adverse opinion. The financial statements are not fairly presented because they do not factor in all costs associated with the fire. These costs include clean up costs and possible legal costs to try to recover some money from the insurance company because you can not leave the site as it is now. The financial statements must also accrue for the loss on the building as the asset is now useless and must be written off. The financial statements are useless as presented the way they are, and the company may have a hard time receiving financing to help rebuild.2a) There are no deviations from an unqualified standard report as the auditor has satisfied himself with the cutoff of cash by performing alternative procedures.b) The financial statements are immaterially stated. There is nothing that would affect the users decisions.c) An unqualified standard report should be issued as alternate procedures were used to satisfy the auditing procedure and the auditor concluded that the cutoff of cash was plausible.3a) The deviation for which the conditions require an unqualified standard report is the fact that the client marked up inventory before he was suppose too, which was after his year end date. b) The financial statements are materially misstated as this affects the decisions of users such as creditors because the inflated inventory could throw off financial covenant ratios for the better, even though they may be offside.for the better, even though they may be offside....
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This note was uploaded on 02/18/2011 for the course AUD 101 taught by Professor D.mcgill during the Fall '10 term at Manitoba.

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Auditing - 2225895-Farrah Schechter – Torres – Auditing...

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