Question
during the audit of a company with a December 31, 2020 year-end, management refuses to provide for full disclosure of a restructuring charge due to
during the audit of a company with a December 31, 2020 year-end, management refuses to provide for full disclosure of a restructuring charge due to large-scale changes within the organization (there will be 200 employees laid off in the new year and severances will need to be paid). However, they were willing to provide the following partial disclosure:
Subsequent to year-end, there will be organizational change that may result in a temporary increase in HR-related costs.
The auditor was of the opinion that this disclosure failed to fully provide for the impact as there will be some employees with several years of service with the company, as well as the potential for litigation.
Required:
a. Explain, with reason, whether the situation described above gives rise to a GAAP departure or a scope limitation.
b. explain with reasons the type of audit opinion that would be provided. be sure to fully explain the rationale and nature of the report.
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