Reference no: EM132470708

Problem 1: What are the Material Level, the Additional Information, and the auditing report of 4 situations below

Point 1: Four weeks after the year-end date, a major customer of Prince Construction Co. declared bankruptcy. Because the customer had confirmed the balance due to Prince at the balance sheet date, management refuses to charge off the account or otherwise disclose the information. The receivable represents approximately 10% of accounts receivable and 20% of net earnings before taxes. Given condition is "Failure to follow GAAP"

Point 2: During your audit of Raceway.com, Inc., you conclude that there is a possibility that inventory is materially overstated. The client refuses to allow you to expand the scope of your audit sufficiently to verify whether the balance is actually misstated. Given condition is " Scope of the audit has been restricted"

Point 3: You complete the audit of Munich Department Store, and in your opinion, the financial statements are fairly presented. On the last day of the audit, you discover that one of your supervisors assigned to the audit has a material investment in Munich. Given condition is "Lack of independence"

Question 1) What is the Material Level? Choose from the following

a. High material

b. High material or material

c. Immaterial

d. Material

e. Not applicable

Question 2) What is the Additional Information? Choose from the following

a. Amount of loss

b. Auditor's judgement

c. Client imposed limit

d. Size materiality

Question 3) What is the auditing report? Choose from the following

a. Qualified

b. Unqualified

c. Disclaimer

d. Adverse