Auditing Individual Assignment 1 Part 1 (80%) Submit the typed answer of this part individually to SOUL (PDF format required). For the following independent situations, assume that you are the audit partner on the engagement: 1. Flora Co had acquired another company few years ago which had become a division of Flora Co. Goodwill of $350,000 was recorded at the date of acquisition. Last year, the company has recorded loss from goodwill impairment of $100,000. In the current year, the company carrying value of the division was $800,000 and the recoverable amount is determined to be $900,000. Therefore, reversal of impairment was recorded for $100,000. The company has a net income of $2 m. 2. Fortune Co has $100,000 inventory held by Just Department Store on a consignment basis. Confirmation request has been already sent to them after the year end. However, no reply has been received after repeated follow-ups. The company has total asset of $1,500,000. 3. The client has a subsidiary in the USA and another in Canada, which this year together accounted for around 8% of the group's revenue, profits and net assets included in the consolidated financial statements of the client. Neither subsidiary is audited although both use external professional accountant to prepare the financial statements. The client's management was unwilling to ask local accountants to perform a full audit. 4. The client has inventory costing $300,000 in the warehouse that is held for over 2 years. The related inventories are outdated and cannot be easily sold. It is expected that the inventory would be sold to the customers at only 50% of the cost. The client has a net income of $100,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost. 5. Your client, Harrison Automotive, has changed from straight-line to sum-of-the years' digits depreciation. The effect on this year's income is material, and no information is disclosed in footnotes related to the change. You believed the change aligns with change in usage pattern of the automobile. 6. If all things are the same as situation 5, except that adequate disclosure is made relating to the change of depreciation method after your advice, will your opinion be different? Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion. For the situations 1 and 2, draft the opinion paragraph and any corresponding basis of opinion paragraph (if any)