An auditor did not observe a client’s taking of beginning physical inventory and

Question

An auditor did not observe a client’s taking of beginning physical inventory and was unable to become satisfied about the inventory by means of other auditing procedures. The possible effects are material. Assuming no other scope limitations or reporting problems, the auditor could express an unmodified opinion on the current year’s financial statements for A. The balance sheet only. B. The income and retained earnings statements only. C. The income statement only. D. All of the financial statements.

Explanation / Answer

The correct answer is A The balance sheet only.

The auditor did not watch the checking of physical inventories toward the start of the year and was not ready to end up noticeably fulfilled by performing different systems on those inventories. Since they go into the assurance of net wage and money streams, the auditor couldn't decide if any alterations were required concerning benefit and net money streams from operating activities. Besides, the conceivable impacts of the failure to acquire adequate suitable proof with respect to starting inventories are material. Hence, the auditor ought not express a feeling on the consequences of operations and money streams. In any case, in light of the fact that the asset report reports just the closure stock adjust, the auditor can express an unmodified sentiment on only it, accepting he is happy with the ending balance.

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