Bahwana Tours is a medium-sized travel agency in Oman. It was established in the year 2015. It has been operating for four years now and business has been doing well. Your firm has been auditing Bahwana Tours since it was established. For this year-end audit, you were assigned by your firm to Bahwana Tours. The audit for the current year is now nearly complete. Though you expect the audit to go smoothly like in the past, this year seem to be different. In the analysis, you noticed some unbelievable trends including a 200% increase in revenue since last year despite the economy being relatively flat. You have also noticed that Bahwana Tours changed their accounting treatment for revenues which was different compared to last year. As it seem unusual for Bahwana, you and the audit partner have spoken to senior management. You told them about the inappropriateness of the new accounting treatment and ask them if they could go back to the old one they were using or find another alternative. However, senior management have refused to change it or make any disclosures relating to these accounting policy changes in the notes to financial statements. They mentioned that this accounting treatment has helped them increase their revenue greatly and it will attract many investors. You estimate that if the accounting policy were to be changed to comply with the appropriate financial reporting framework, the current profit of OMR 1,000,000 would reduce by half.

Required: Explain your answer to the following questions:

1. Based on the given situation, write your reasons if the auditor can form his opinion on the financial statements? Formulate your answer based on ISA 200 and ISA 700 concepts. (3 marks) 2. What are the key decision points that could be obtained by the auditor from the case in forming his opinion? Determine the appropriate auditors opinion to be included in the auditors report whether

Unmodified Opinion or Modified Opinion. Justify your decision.

(7 marks)