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arushi_13
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| Posted: 05 Jul 2008 at 20:08 | IP Logged
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In the first audit of a client, an auditor was not able to gather sufficient evidence about the consistent application of accounting principles between the current and prior year, as well as the amounts of assets or liabilities at the beginning of the current year. This was due to client's record retention policies. If the amounts in question could materially affect current operating results, the auditor would:
Ans:Be unable to express an opinion on the current year results of operations and cash flows
Explanation:
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Since the auditor was unable to gather sufficient evidence on the beginning balances of the balance sheet accounts, the auditor would be unable to express an opinion on the current year's results of operations and cash flows. The auditor could express an opinion on the statement of financial position.
I understand the answer. But I am unable to understand the last line of the explanation para where it says : "The auditor could express an opinion on the statement of financial position."
Please explain why would the auditor be in a position to express an opinion on the SOFP?
Thanks for your help.
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TX-CPA2008
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| Posted: 05 Jul 2008 at 21:12 | IP Logged
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the auditor could express an opinion on the balance sheet (or stmt of financial position) since it's at a point in time (12/31). the opinion in for that particular date. that's why beg balances don't matter for the b/s. hope it helps.
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** TEXAS **
REG - 86
BEC - 80
AUD 7/12 - ???
FARE 8/29 - ???
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arushi_13
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| Posted: 05 Jul 2008 at 21:23 | IP Logged
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Sorry, but I m still not clear. I was of the opinion that the beginning balances are of paramount importance. E.g. Assets acquired during prior year on which depreciation expense will be based , the beginning balance is important as it will be the basis for depreciation expense and also basis for proper reporting of the asset at its ending balance in the B/S.
If auditor is unable to gather sufficient evidence on the beginning balance of the asset then I/S as well as ending asset balance in the B/S, both accounts will be affected.
Thus, I m still unclear. Please help.
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TX-CPA2008
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| Posted: 05 Jul 2008 at 21:59 | IP Logged
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beg balances don't matter for b/s opinion. the auditor renders an opinion only on the b/s as of a point of time. the i/s is different, since the opinion if for a period of time, therefore beg balances do matter.
Edited by TX-CPA2008 on 05 Jul 2008 at 22:00
__________________
** TEXAS **
REG - 86
BEC - 80
AUD 7/12 - ???
FARE 8/29 - ???
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arushi_13
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| Posted: 06 Jul 2008 at 11:22 | IP Logged
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Thanks a ton for your help. It is much clearer to me now.
Thanks again.
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Topic: Audit reporting
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