Candle Inc is a company that has a total of 48 employees . It uses a local area network , timekeeping software , accounting systems and production systems software . All systems are locally purchases and locally maintained . There are no in - house IT staff .

The controller is responsible for setting up new users and changing user capabilities based upon scripts ( standard instructions ) provided by the network supplier . If she has any problems , she telephones the network supplier , who logs on to the system and makes the changes for her online

. All three accounting personnel and the owner of the company have access to all accounting systems . Manufacturing employees have access to timekeeping and production systems . The controller prepares the bank reconciliation , but the owner signs the payroll cheques and accounts payable cheques ( with supporting documentation attached ) .

The controller is responsible for recording all changes in wage rates in the accounting systems and writing off accounts receivable . The receptionist is responsible for printing reports , while there are two staff members who handle both Accounts payable and Accounts receivable transactions .

REQUIRED :

4 ) Two additional items have arisen during the review . The items are :

Item 1 : The client has experienced significant operating losses since 2020 and has had to get permission from the bank to post it's loan repayments . Management is going to include the problem in the annual report but is not going to reflect the situation in the financial statement notes . What opinion would you issue and WHY ? Base your response solely on this scenario . ( 3 Marks - 1 for the opinion and 2 for why )

Item 2 : As a part of the post - balance sheet data audit procedures , the CPA , learned of heavy damage to one of the client's two manufacturing plants due to a recent fire ; the loss will not be reimbursed by insurance . It occurred after the balance sheet date .

The newspapers described the event in detail . The financial statements and notes as prepared by the client do not disclose the loss caused by the fire . Is this a subsequent event ? If so , what type and what action should be taken ( 4 marks )