I am working on an audit of a manufacturing company which makes widgets.These widgets are colored purple and orange, plus big polka dots which are teal.

While I am doing my observation of physical inventory, I notice that the client has some very dusty widgets which are solid colors:light brown, light blue, black, and white.The client says that nobody would buy them; customers want the traditional striped/polka-dotted widgets.

Practically all the assets are in either the inventory account or the accounts receivable account.The accounts receivable account ($750,000) is composed 85% of balances from years ago when the customers bought the brown, blue, black, or white widgets but never paid for them after the audit client refused to sell any more to those customers-or to anybody else, for that matter.The inventory account ($400,000) is composed about 50% of old, solid-color widgets and about 50% striped/polka-dotted widgets.

The client company's pre-tax income for the year, according to the client-prepared financial statements, was $23,100.

I am confused what kind of audit report should be rendered?

My idea is using Adverse Opinion Report. But, I am not sure whether it's correct. I also want to know the reason why I need to render this kind of audit report.