Assume you are the partner in charge of the 2012 audit of Bashir Corporation, a private company. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate action to be taken.
-Management of Bashir Corporation refuses to allow you to observe, or make, any counts of inventory. The recorded book value of inventory is highly material.
A) Issue a standard unmodified audit report.
B) Issue an qualified report in the form of a qualification of both the scope and opinion.
C) Issue an qualified report in the form of a qualification of the opinion only.
D) Issue an unmodified opinion with an emphasis of a matter paragraph.
E) Issue an unmodified opinion with modified wording.
F) Issue an adverse opinion.
G) Disclaim an opinion.

Question

Quizplus · Accepted Answer

When management refuses to allow the auditor to observe inventory counts, and the inventory is highly material to the financial statements, the auditor cannot obtain sufficient appropriate audit evidence regarding inventory balances. This limitation on the scope of the audit prevents the auditor from forming an opinion on the financial statements as a whole. Therefore, the appropriate action is to disclaim an opinion.

Assume You Are the Partner in Charge of the 2012