Reference no: EM132567932

Question 1: The following are four independent situations. For each case, state the type of audit opinion that should be expressed and provide a brief explanation to justify your choice:

1. Approximately 20% of the audit of Pine Farms Ltd was performed by a different public accounting firm, selected by you. You have reviewed the accountants' working papers and believe they did an excellent job on their portion of the audit. Nevertheless, you are unwilling to take complete responsibility for their work.

2. The controller of City Hotels Company Ltd won't allow you to confirm the receivable balance from two of its major customers. The amount of the receivable is material in relation to City's financial statements. You are unable to satisfy yourself as to the receivable balance by alternative procedures.

3. In the last three months of the current year, Oil Refining Company Ltd decided to change direction and go significantly into the oil-drilling business. Management recognises that this business is exceptionally risky and could jeopardise the success of its existing refining business, but there are significant potential rewards. During the short period of operation in drilling, the company has had three dry wells and no successes. The facts are adequately disclosed in footnotes.

4. Kieko Co. Ltd has prepared financial statements but has decided to exclude the statement of cash flows. Management explains to you that the users of their financial statements find this statement confusing and prefer not to have it included.