Cravens was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records. Cravens has observed the current inventory but has not observed the physical inventory at the previous year-end date and concludes that the opening inventory balance, which is not auditable, is a material factor in the determination of cost of goods sold for the current year. Cravens will probably:
A)decline the engagement.
B)express an unqualified opinion on the balance sheet and income statement except for inventory.
C)issue a disclaimer of opinion.
D)issue an adverse opinion.

Question

Quizplus · Accepted Answer

Since Cravens is unable to obtain sufficient audit evidence and the opening inventory balance is a material factor, the auditor should disclaim an opinion on the financial statements. This is because the auditor cannot express an opinion on the financial statements without sufficient audit evidence to support the opening inventory balance.

Cravens Was Asked to Perform the First Audit of a Wholesale