Question

For the following independent situations, assume you are the audit partner on the engagement. For each situation, using the framework for reporting decisions, identify the appropriate audit report from the list below and briefly explain your choice. a) Unmodified opinion b) Unmodified opinion with material uncertainty related to going concern paragraph c) Unmodified opinion with emphasis of matter or other matter paragraph d) Qualified opinion - inappropriate accounting policy or material misstatement e) Qualified opinion - scope limitation f) Disclaimer of opinion g) Adverse opinion 1. Kieko Corp.has prepared financial statements but has decided to exclude the cash flow statement Management explains to you that the users of its financial statements find that particular statement confusing and prefer not to have it included. 2. HardwareFromHome.com is an internet-based start-up company created to sell home hardware supplies online. Although the company had a promising start, a downturn in ecommerce retailing has negatively affected the company. The company's sales and cash position have deteriorated significantly, and you have reservations about the ability of the company to continue in operation for the next year. 3. A different public accounting firm, which you had selected, performed approximately 20 percent of the audit for Furtney Farms Inc. You have reviewed its working papers and believe it did an excellent job on its portion of the audit. Nevertheless, you are unwilling to take complete responsibility for its work. 4. The controller of Fair City Hotels Co. Ltd. will not allow you to confirm the receivable balance from two of its major customers. The amount of the receivable is material in relation to Fair City's financial statements. You are unable to satisfy yourself as to the receivable balance by alternative procedures.

Answer 1

1. Kieko corp has prepared financial statements but has decided to exclude the cash flow statement. Management explains to you that the users of its financial statements find that particular statement confusing and prefer not have it included

Adverse opinion, failure to follow GAAP

2. Hardware from home.com is an internet based start up company created to sell home hardware supplies online. Although company had a promising start, a downturn in ecommerce retailing has negatively affected the company

Unqualified opinion with material uncertainity related to going concern paragraph

3. A different public accounting firm, which you had selected performed approximately 20 percent of audit for furtney farms inc. you have reveiwed its working papers and believe it did an excellent job on its position of the audit

Unqualified opinion with emphasis of matter or other mater paragraph

4. The controller of fair city hotels co ltd will not allow you to confirm the receivable balance of from to of its major customers. The amount of the receivables is material in relation to the fair city’s financial statements

Disclaimer of opinion