Miscellaneous Conditions Affecting Audit Report. In the following independent situations, assume that you are the audit partner.

1 When you requested permission to inspect the minutes of the board of directors meetings, you were refused. However, the corporation secretary offers to give you a certified copy of all board of directors’ resolutions and actions relating to accounting matters.

2 On 2 January 20X1 a retail electronic parts company received a notice from its primary supplier that effective immediately, all wholesale prices would be increased 15 per cent. On the basis of the notice, the company revalued its 31 December 20X0 inventory to reflect the higher costs. The inventory was a material proportion of total assets; however, the effect of the revaluation was material to current assets but not total assets or net income. The increase in valuation is adequately disclosed in the footnotes.

3 You learned of heavy damage to one of your client’s two plants due to a recent earthquake subsequent to the date of the financial statements. The loss was not covered by insurance. The local television station showed detailed film of the destruction. The financial statements and appended notes as prepared by the client did not disclose the loss.

4 The controller of Fatima Resort, Athens, Greece, will not allow you to confirm the receivable balance from two of its major customers. The amount of the receivable is material in relation to Fatima’s financial statements. You are unable to satisfy yourself as to the receivable balance by alternative methods.

5 You had to hire an auditor from another country to audit a subsidiary of Link Corporation of Chicago, Illinois, which represented 15 per cent of Link’s gross sales and 31 per cent of their current assets. You have never used them before, but believe they have done a good job.

6 Your firm has audited Titan Electronics of Paris, France, for the past 10 years. During the last three years their financial condition has declined steadily. In the current year, for the first time, the current ratio is below the minimum requirement specified in their major loan agreements with their bank. You now have reservations about the ability of Titan to continue in operation for the next year.

Required For each situation state the type of audit report that should be issued. If your decision depends on additional information, state the alternative reports you are considering and the additional information you need to make the decision.