Reference no: EM132614146
Assume you are an auditor and you are facing the following separate circumstances, the effects of all items below are material:
1. During your examination of Debold Batteries, you conclude there is a possibility that inventory is materially overstated. Management refuses to allow you to expand the scope of your examination sufficiently to verify whether the balance is actually misstated.
2. You were engaged to examine Cutter Steel Company Ltd.'s financial statements after the close of the financial year. Because you weren't engaged until after the financial report date, you weren't able to physically observe inventory, which is highly material. On the completion of your audit, you are satisfied that Cutter's financial statements are presented fairly, including inventory, about which you were able to satisfy yourself by the use of alternative audit procedures.
3. Four weeks after the year-end date, a major customer of Price Construction Company Ltd went into liquidation. Because the customer has confirmed the balance due to Prince at the financial report date, management refuses to charge off the account or otherwise disclose the information. The receivable represents approximately 10% of accounts receivable and 20% of profit from ordinary activities.
Required:
Question 1: Outline what the issue is and then describe the effect of each of the above circumstances on your auditor's report if management were to refuse to make any changes you feel necessary in order that the financial report gives a true and fair view.
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