1.An auditor's study and evaluation of the internal accounting control system made in connection with an annual audit is usually not sufficient to express an opinion on an entity's system because: (why option C is correct?)

A.

the audit cost-benefit relationship permits an auditor to express only reasonable assurance that the system operates as designed.

B.

the evaluation of weaknesses is subjective enough that an auditor should not express an opinion on the internal accounting controls alone.

C.

only those controls on which an auditor intends to rely are reviewed, tested and evaluated.

D.

management may change the internal accounting controls to correct weaknesses.

2. On 2 July 2018 Fluro Paint Ltd received a notice from its primary suppliers that all wholesale prices would be increased by 10%, to be effective immediately. On the basis of the notice Fluro Paint Ltd revalued its 30 June 2018 inventory to reflect the higher costs. The details of the adjustment were disclosed in the notes to the financial report. The inventory adjustment was material. The auditor of the 30 June 2018 financial report would issue:

(why the answer is C instead of D?)

A.

an unmodified opinion with an Emphasis of Matter of disclosure.

B.

a disclaimer of opinion.

C.

a qualified opinion.

D.

an unmodified opinion.