Question

Make pretend you are a partner in charge of the 2018 audit of Sickler Corporation, a private company. The audit report has not yet been prepared. In each of the following situations (a-h), indicate the appropriate action (1-7) to be taken. Justify your answer with an explanation. The possible actions are as follows: 1. Issue an unmodified opinion audit report. 2. Qualify both the scope and opinion paragraphs. 3. Qualify the opinion paragraph. 4. Issue an unmodified opinion with an explanatory paragraph. 5. Issue an unmodified opinion with revised wording (no explanatory paragraph). 6. Issue an adverse opinion. 7. Disclaim an opinion. The situations are as follows: ____ ___ a. Sickler Corporation carries its fixed asset (Bldgs, property, and Equipment) accounts at current market values. The current market values are greater than the historical cost by a highly material amount, and the effects are pervasive throughout the financial statements. Justify your answer with an explanation: ________ b. The owners of Sickler Corporation will not permit you, the auditor, to observe, or make, any counts of inventory. The recorded book value of inventory is highly material. Justify your answer with an explanation: ________ c. You couldn’t confirm the accounts receivable with Sickler's customers. However, because of detailed sales and cash receipts records, you were able to perform reliable alternative audit procedures. Justify your answer with an explanation: ________ d. A few days before the end of fieldwork, you discover that the audit manager on the Sickler engagement owns a material amount of Sickler's common stock. Justify your answer with an explanation: ________ e. You relied upon another CPA firm to perform part of the audit. Although you were the principal auditor, the other firm audited a material portion of the financial statements. You wish to refer to (but not name) the other firm in your report. Justify your answer with an explanation: ________ f. You have substantial doubt about Sickler's ability to continue as a going concern. Justify your answer with an explanation: ________ g. Sickler Corporation changed its method of computing depreciation in 2018. You agree with the change and the change is properly disclosed in the financial statement footnotes. Justify your answer with an explanation: ________ h. Sixteen days after the balance sheet date (but before audit opinion was issued), one of Sickler's buildings was destroyed by a hurricane. Sickler refuses to disclose this information in a footnote to the financial statements, but you believe disclosure is required to conform with GAAP. The amount of the uninsured loss was material, but not highly material. Justify your answer with an explanation:

Answer 1

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