Explain how unqualified opinion on 2020 financial statements

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Reference no: EM133432743

Question: GKC, CPA expressed an adverse opinion on the operating effectiveness of internal control on December 31, 2020 for TQI, Inc. This was due to a material weakness related to the key control activity, monitoring of accounts receivable arrears by the credit manager. The auditor expressed an unqualified opinion on the financial statements.

In a planning meeting for the 2021 audit, a new audit associate was adamant that the firm made a mistake in issuing an unqualified opinion on the 2020 financial statements when it was mentioned that the control, concluded to be a material weakness, did not also operate effectively for most of 2020.

Explain how the unqualified opinion on the 2020 financial statements was possible. Incorporate the audit risk model in your response,

Reference no: EM133432743

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