For the tollowing please provide two answers for each situation: one from list A

Question

For the tollowing please provide two answers for each situation: one from list A and one from list B Each case describes one of the circumstances/situations that may result in a report modification. Assume a publicly traded company: (14 points) 43/44. The auditor was unable to do an inventory observation at year end (December 31st) because he was hired in the middle of January. Management does not allow the auditor to do an inventory observation in January, because they claim it is too disruptive for business. 45/46. Because of inadequate records the auditor is uncertain as to whether inventory is property

Explanation / Answer

List A)

My answer will be 3.GAAP Departure.

Here,we can see that there are several areas like valuation of fixed assets etc where Generally Accepted Accounting Policies are ignored.There are other matters like Going concern uncertainty as the auditor feels so and consistency issues with this client as he changed inventory policy.However,the consistency issues can be neglected as the auditor accepts but such change in policies is to better presentation of financial statements.Scope limitation is another issue here but upto me the impact of GAAP departure is more.

List B)

Here Auditor must issue Qualified opinion.It is because not all accounting information is not shown to auditor but his scope got limited at inventory and there are lots of areas where Generally Accepted Accounting Policies are ignored

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