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Question

AaBbCcl AaBbCcl AaBbccl AaBbCcI AaBbCc, AaBbC AaB ] u.bex, xa :, ·. || Emphasis "Heading 1 Heading 3 T Normal! Subtitle Table Text A,.A- Title Font Paragraph Styles ol Commerce Technology 3. For each of the following situations, describe how the auditors' report on internal control over financial reporting would be modified from the standard, unqualified report. Do not write the actual reports. a. The auditors have identified a material weakness in the processing of sales transactions b. Because a relatively short period of time has passed since a control weakness was remediated, the auditors do not believe that sufficient evidence can be obtained with respect to the operating effectiveness of the entity's internal control over financial reporting. c. Component auditors have audited a significant component of the group financial statements, including internal control over financial reporting relating to that component. They did not find a material weakness in internal control, and the group auditor believes the component auditor's work can be relied orn. d. The auditors believe that the entity's management has not adequately disclosed a material weakness in its internal control over financial reporting. Good Luck

Explanation / Answer

a.) The auditors have found material weakness in the processing of sale transactions. In this situation, this weakness is material but not pervasive i.e it does not have effect on all the financial figures. Therefore auditors report will be qualified in this case.

b.) Since sufficient evidence can not be obtained regarding operating effectiveness of internal control over financial reporting therefore there will be disclaimer of opinion. Thus auditors report will provide disclaimer of opinion because nothing can't be said about controls effectiveness.

c.) Components auditor has not detected any material misstatement in internal controls and company auditors believes that component auditors work can be relied upon, thus there will be no change in auditors report. Auditors report would remain standard and unqualified in this case.

d.) The auditors believe that management has not disclosed a material weakness in internal controls thus there will be high chances that the material weakness will be persuasive also and thus auditor will issue an adverse opinion. Thus auditors report will be adverse in this situation.

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