Reference no: EM133004205

Question -

a) You are an audit manager at PFC Chartered Accountants. The management of a potential client, Dubai International, is currently considering whether to have an audit or a review of their financial statements.

Required - Explain the difference between an audit engagement and a review engagement.

b) You are responsible for answering technical queries from other auditors in your firm. An audit manager, Leslie, left the following note on your desk this morning:

"Artiss Architecture (Artiss) is one of our audit clients. One of their major customers went into liquidation in March 2021. The balance due from the customer at 31 December 2020 was $148,000. This is a material amount. There has been no provision/allowance for doubtful debts raised for this debtor in the financial statements for the year ended 31 December 2020. Artiss' legal adviser stated in a telephone call that the probability of any funds being received from the debtor is remote. No further audit evidence was obtained."

Required - i) Referring to the note from Leslie, comment on whether the audit evidence obtained is sufficient and appropriate.

ii) What audit opinion would be provided in the audit report if the financial statements do not include a provision or allowance for this amount? Justify your answer.