Reference no: EM132382033
Question
Billy's Burger House, a private company, is a china of fast-food restaurants that has experienced fast growth in the last decade. The restaurant chain has been successful because it focuses on the three core foods of hamburgers, French fries, and milkshakes rather than trying to offer a wide range of options. Billy's Burger House has a loyal customer base because of the high quality and consistency of its three core foods.
In the last nine months of 2022, Billy's Burger House locations have been opening inside of AllMart supermarkets. The Vice President of operations of AllMart is the brother of the CEO and founder of Billy's Burger House. The two brothers have been working on this plan for the last three years. With this new alliance with AllMart, Billy's Burger House expects to see more growth in the next four years than it has experienced in the last 10years. In its December 31,2022, financial statements, Billy's Burger House has disclosed the alliance with AllMart as a related party transaction.
Required:
a. The auditors of Billy's Burger House intend to issue an unmodified opinion on Billy's financial statements and add an emphasis-of-matter paragraph to highlight the related party situation. Draft the audit report.
b. If management of Billy's Burger House had refused to disclose the material related party transaction in the financial statements as required by the financial reporting framework, evaluate the auditor's reporting options. What factor or factors would auditors consider in deterring what type of report to issue?
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