On February 28, 2014, Stu & Dent, LLP completed the audit of Shylo Ranch, Inc. (a public company) for the year ended December 31, 2013. A recent fire destroyed the accounting records concerning the cost of Shylo's livestock. These were the only records destroyed.
The auditors are unable to obtain adequate evidence concerning the cost of the livestock, which represents about 8% of total assets. These are GAAP-based financial statements, and the auditors found no other problems during the audit. The audit report is to cover the 2013 financial statements only. The audit partner has indicated that a qualified opinion is more appropriate than an adverse opinion.
Prepare a draft of the audit report for review by the audit partner.