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auditing research case no. II_1_5318

auditing research case no. II_1_5318 - Accounting 5318...

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Accounting 5318 Auditing Research Cases No. II For the following questions and issues, provide an explanation of your position, as well as specific citations to the professional literature supporting your position. 1. A potential client is seeking a loan at a bank. The loan will be secured by fixed assets and accounts receivable of the potential borrower. The banker has requested that the potential client obtain an auditor's opinion on only fixed assets and accounts receivable, as opposed to an opinion on the financial statements taken as a whole, in order to reduce cost. Can we provide such an opinion? If so, how will materiality be defined? According to AU Section 623.11 of AICPA professional standards, “An independent auditor may be requested to express an opinion on one or more specified elements, accounts, or items of a financial statement. In such an engagement, the specified element(s), account(s), or item(s) may be presented in the report or in a document accompanying the report.” Therefore, in this case, we can provide the banker with our opinion on only fixed assets and accounts receivables, as opposed to an opinion on the financial statements taken as a whole. Also, AU Section 623.13 states that “…an auditor expresses an opinion on each of the specified elements, accounts, or items encompassed by the auditor’s report; therefore, the measurements of materiality must be related to each individual element, account, or item reported on rather than to the aggregate thereof or to the financial statements taken as a whole.” 2.
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