Lng Ngc Thi CQ533403

Homework 06/01/2015

Student : Lng Ngc Thi

Code : CQ533403

Audit Assignment
Exercise 17-27: The audit reports classifications, which the auditors generally should
issue in the circumstance presented below:
a) Disclaimer classification is appropriate. Because the financial statement can be
affected by the undetected misstatements, if any, could be both material and
pervasive.
b) Unmodified-standard classification is appropriate. Because when no reference is
made to the component auditors.
c) Qualified auditor report is issued. Because there are no evidences that leads to
either a qualified opinion or an adverse opinion and the effect is material, but not
pervasive.
d) Unmodified-standard classification is appropriate with an emphasis-of-matter
paragraph should be used to issue the audit report and the auditor does not agree
that the change is desirable.
e) Adverse auditor report is appropriate. Because the auditor does not agree with
the change, it doesnt follow the GAAP and the amount is material and pervasive.
Exercise 16-39: Adapted AICPA Task-Based Simulation
a) In this circumstance, Adjustment occurred because of following reason:
The date of receipt the shipment of raw materials by Flowmeter on January
3 provides additional evidence with respect to conditions that existed at the
December 31 balance sheet date.
The eco-terms is FOB shipping point were the property of Flowmeter. The
financial statements should be adjusted to ensure the complete of new
informations becoming available after the balance sheet date. The
adjustment consists of an increase in inventories and the recording of a
related liability.
b) In this case, Adjustment should be used.
Flowmeter's liability for the accident came into existence in March of 20X3
when the accident occurred.
No reasonable estimate could be made of the dollar amount cause the
liability had not been accrued in the accounts as of December 31
The settlement of the litigation provides additional information permitting a
reasonable estimate of the amount of the liability.
c) Disclosure (note disclosure as of 20X3) should be used because:

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Lng Ngc Thi CQ533403

Homework 06/01/2015

The purchase of a new business does not provide evidence with respect to
conditions existing at the balance sheet date; thus, it is not necessary to
adjust the financial statements.
The event would usually be of such importance that its disclosure would be
required to keep the financial statements from being misleading.
Note: If the acquisition is significant enough, the auditor should
consider requesting the client to supplement the primary financial
statements with pro-forma statements indicating the financial results if the
two firms had been consolidated for the year ended December 31, 20X3.
d) Disclosure is used because.
Lack of attributable to floods occurring after the balance sheet date do not
provide evidence as to conditions existing at the balance sheet date; thus,
the financial statements should not be adjusted.
Disclosure of the damage caused by the flood is necessary to prevent the
financial statements from being misleading.
e) In this case, they should result in Disclosure because of:
Because the sale of bonds or capital stock after the balance sheet date does
not relate to conditions existing at the balance sheet date.
However, such an event usually is significant enough that it should be
disclosed to prevent the financial statements from being misleading.

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