Described below are situations which have arisen at four unrelated external audit clients of your firm. The year end in each case is 30 June 2020.

Situation 1

Portmerions Berhad (Portmerions) manufactures luxury retail tableware, dining and gifts to customer specification, for Harrads a large department stores in Kuala Lumpur. On 1 August 2020, Royal Roses Berhad (Royal Roses), a customer of Portmerions Berhad went into liquidation. On 30 June 2020, Portmerions had work in progress (WIP), valued at cost of RM1,500,000, relating to tableware ordered by Royal Roses which had not been delivered by 1 August 2020. Portmerions estimates that the if a further RM500,000, is spent on the WIP they can be used to meet an outstanding order for another customer at a selling price of RM1,215,000. The directors of Portmerions have refused to make any adjustments to the value of work in progress as they were not aware of Royal Roses's financial difficulties until after the year end. The total assets of Portmerions at 30 June 2020 are RM14 million and the audit report is finalized in 15 September 2020.

Situation 2

Your audit firm has been restricted from attending the inventory count at Glemhouse's warehouse on 30 June 2020, nonetheless you able to perform alternative audit procedures to satisfy the final valuation of the inventory. However, during the review, you noted that half the inventory were held at a third party's premises on this date. Glemhouse has not retained any count records in respect of the inventory held by the third party and there are no other records from which the amount of inventory can be substantiated. The directors wish to include the inventory held at the third party's premises in the year-end financial statements at RM75,000. The total assets of Glemhouse at 30 June 2020 are RM5 million and the profit before tax for the year ended 30 June 2020 is RM800,000.

Situation 3

Berger and Lempe Berhad (Berger and Lempe) research and development costs relating to a new cool technology engine oil to reduce engine heats with online ordering and payment facilities are included in the statement of financial position as at 30 June 2020. The development of the new engine oil was undertaken by a company specialising in lubricants development, in conjunction with employees from Berger and Lempe Research and Technology department. The capitalised costs include RM750,000 relating to time spent by Berger and Lempe's employees and are based on the finance director's estimates. There are no records supporting the time spent by Berger and Lempe's employees and there are no other satisfactory audit procedures to confirm that labour costs have been appropriately capitalised. The total assets of Berger and Lempe at 30 June 2020 are RM11 million and the profit before tax for the year ended 30 June 2020 is RM3.5 million.

Situation 4

Based on discussion with the top management and results of assessments of going concern has cast significant uncertainty about the financial performance of the company. The financial statements of Americano Berhad (Americano) has not included a note regarding a significant uncertainty about the going concern status of the company. Nonetheless, you are satisfied that the regularization plan proposed by the top management in improving the financial condition of Americano.

Requirements:

For each of the four situations outlined above, state whether you would modify the audit opinion. Give reasons for your conclusions and describe the modification(s), if any, to each audit report.