Question

Question 5 (20 marks)Your firm, WWW LLP, is the auditor of Walnut Ltd. The auditor’s report below was drafted by Beanie Junior, a staff accountant at the firm. Walnut Ltd. is a publicly-held company (incorporated under the Canada Business Corporations Act and traded on the Toronto Stock Exchange) with a year end of December 31, 2018. The report was submitted to the engagement partner who reviewed the audit working papers and properly concluded that an unmodified opinion should be issued. In drafting the report, Beanie considered the following:

The 2018 financial statements are affected by an uncertainty concerning a lawsuit, the outcome of which is material and properly disclosed and recorded in the financial statements. The company also has a significant number of related party transactions that required extensive audit work to ensure these related parties were adequately disclosed in the notes to the financial statements. There are no subsidiaries.

The audit work was fully completed and the audit report was accepted by Management and the Audit Committee of Walnut Ltd. on May 21, 2019. ____________________________________________________________________________________

Independent Auditors’ Report : To the Shareholders of Walnut Ltd.

Report on the Financial Statements Opinion : We have audited the consolidated financial statements of ABC Company (the Company), which comprise the statement of financial position as at December 31, 2018, and the statement of comprehensive income, statement of changes in equity, and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, [or give a true and fair view of] the financial position of the Company as at December 31, 2018, and its financial performance and its cash flows for the year then ended in accordance with the Accounting Standards.

Basis for Opinion : We conducted our audit in accordance with CASs and the Canadian Quality Control Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance withthe Provincial Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants together with the ethical requirements that are relevant to our audit of the financial statements in [jurisdiction], and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Auditors’ Responsibilities for the Audit of the Financial Statements : Our objectives are to obtain moderate assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Moderate assurance is a reasonable level of assurance but is not a guarantee that an audit conducted in accordance with CASs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Responsibilities of Management and Those Charged with Governance for the Financial Statements : Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going-concern basis of accounting unless management intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Management is responsible for overseeing the Company’s financial reporting process.

Key Audit Matters : Key audit matters are those matters that were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion, thereon, and we have outlined in a separate report these matters.

May 31, 2019

WWW LLPHamilton ON

Required

Identify the deficiencies in the order in which they appear in the auditor’s report drafted by Beanie. Do not redraft the report.

Use the following framework to answer the question.

Violation Explanation from the question

Answer 1

As there are no subsidiary companies of walnut ltd. He shall not write the word ' consolidated financial statements' , instead he shall simply state the word ' financial statements'

The name of the company shall be disclosed in the report.

Thirdly , he shall state that all the statements are prepared on 31 Dec , 2018 not only the statement of financial position .

As he have said that the financial statements are prepared in all material aspects , he shall not again state that the statement of cash flows are according to the accounting standards.

He shall include a paragraph naming ' REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS' where he shall state the lawsuit held by the company during the year.

At last he shall also write down the signature as

For walnut ltd.

WWW LLP Hamilton on( firm registration no.)

Signature

( Name of the member signing the report)

( Designation)

Date : may 21, 2018. ( instead of 31 may , 2018)