Select the most appropriate opinion for the scenario below.

For the year-end inventory balance, the client was unable to conduct a single stocktake of all inventory at the year end due to the geographic diversity of the warehouses. Instead, the client provided evidence of staggered stocktakes and supplied the auditor with a management representation letter confirming the appropriateness of the approach.

Question

Select the most appropriate opinion for the scenario below.

For the year-end inventory balance, the client was unable to conduct a single stocktake of all inventory at the year end due to the geographic diversity of the warehouses. Instead, the client provided evidence of staggered stocktakes and supplied the auditor with a management representation letter confirming the appropriateness of the approach.

BlackTom AI · Accepted Answer

The scenario centers on auditing year-end inventory where a full physical stock count could not be performed due to geographic dispersion of warehouses. Instead, staggered stocktakes were used and a management representation letter was obtained to attest to the adequacy of the approach.
Option 1: Qualified Opinion. This is plausible because the inability to observe the entire inventory and obtain sufficient appropriate audit evidence on the existence and condition of all inventory creates a scope limitation. If the alternative procedures (staggered counts and management rep) provide sufficient evidence about the inventory balances and there is no material misstatement identified, a qualified opinion due to scope limitation is often the appropriate response. The key is that the limitation is not pervasive to the entire financial statements and does not render the financial statements as a whole misleading, but it does warrant reservation of the opinion on the inventory.
Option 2: Unmodified Opinion with emphasis of matter. This would be chosen if there is a material matter disclosed in the financial statements that is of such importance to the user that it requires emphasis, yet the overall financial statements are fairly presented. In this scenario, the issue is the scope limitation on inventory observation, not an item requiring an emphasis of matter disclosure about a significant uncertainty, going concern, or other matter. Therefore, the emphasis-of-m matter path is less fitting unless the matter calls for explicit emphasis beyond the standard scope limitation.
Option 3: Adverse Opinion. An adverse opinion indicates that the financial statements are materially misstated and do not present fairly a material aspect of the financial position. Here, the scenario does not indicate pervasive misstatement in inventory or other areas; it describes a limitation in audit evidence. Without evidence of material misstatements, an adverse opinion would be inappropriate.
Option 4: Disclaimer of opinion. A disclaimer is appropriate when the auditor cannot obtain sufficient appropriate audit evidence and is unable to form an opinion on the financial statements as a whole. If the inability to observe all inventory constitutes a scope limitation that prevents the auditor from forming an opinion, a disclaimer could be appropriate. However, the scenario notes that there is evidence from staggered stocktakes and a management representation letter that the approach is appropriate, suggesting the auditor may still form an opinion (though qualified), making a mere disclaimer less likely.
Option 5: Unmodified Opinion. An unmodified (clean) opinion is generally reserved for situations where the auditor has obtained sufficient appropriate audit evidence and concludes that the financial statements are free from material misstatement. Given the described scope limitation on inventory observation, an unmodified opinion would be inappropriate unless the auditor can demonstrate that the limitation does not affect the financial statements as a whole, which is unlikely here.
Overall, the core tension is whether the evidence obtained is sufficient to support a clean opinion or whether the scope limitation necessitates a qualified opinion. The described staggered stocktakes plus management representations typically lead to a qualified opinion due to scope limitations on inventory observation, rather than a clean unmodified opinion, an emphasis-of-matter scenario, or a more severe disclaimer or adverse outcome.

22730 Auditing and Assurance Services - Spring 2025 Module Quiz 4: In-Class Quiz

查看解析

登录即可查看完整答案

类似问题

During the ICFR audit, the auditor identified two significant deficiencies and concluded that the combined potential financial statement effect did not rise to the level of a material weakness. What opinion will be issued for the ICFR audit?

Auditors issue an ________ to indicate whether financial statements have been prepared in accordance with accepted accounting rules.

An “unqualified” report is:

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单