ISA 705: Modifications to the opinion in the independent auditor's report gives guidance to the auditor when issuing a modified audit opinion. You are the audit manager on four of the clients of your audit firm and you have just started reviewing working papers contained in the audit files of the individual clients. They have also availed to you the draft reports based on evidence so far gathered in the field. The following are extracts of the proposed audit opinions for each of the four clients: Mapambo Ltd The year-end of Mapambo Ltd is 30th September. Majuto Ltd planned to conduct a physical inventory count on 30th September 2021. Fire had occurred and destroyed 90% of the inventory together with all the inventory records. The source of the fire was an electric

fault and hence, Mapambo Ltd was unable reliably determine the value of the remaining stock because the related cost records were also destroyed. The only option they had was to estimate stock values based on selling prices and profit margins for each line of inventory.

The audit senior has recommended that a qualified audit opinion should be issued with an emphasis of matter paragraph as he was unable to obtain any reliable evidence on the value of inventory which he considered material to the financial statements. Upogoroni Ltd The year-end of Upogoroni Ltd is 31st December. In mid-February 2021 before the finalization of the audit, one of the major customers of Upogoroni Ltd went into liquidation. The liquidator of Umoja Ltd convened a meeting with all creditors of Upogoroni Ltd where he announced that all creditors would get all amounts that Umoja Ltd owes. Upogoro Ltd refused to amend the receivables figure arguing that as at the period end the major customer owed Upogoroni Ltd the amount outstanding. The audit senior agreed with the accounting treatment of UpogoroLtd and recommended that an unmodified audit opinion be issued. Kicheko Textile Lid Kicheko Textiles Lid sells cloths on a retail basis at Rock city mall in Mwanza. The company stocks a range of clothes and has the latest fashions in stock at all times. In instances of stock being out of fashion, it is written down in the financial statements. In November 2021, KichekoTextiles Ltd imported a large consignment of clothes so as to take advantage of the Christmas and new-year season with an expectation of increased sales. However, the company did not attain the anticipated sales and by the year-end on 31st March 2022 , Kicheko Textiles Ltd still had high volumes of clothes which were to be sold at less than cost. During the audit it was established that Kicheko Textiles Ltd valued its entire inventory at cost and they were willing to value the inventory at net realizable value. The audit senior has recommended that the audit opinion should be modified by way of a disclaimer of opinion. Kigamboni Nyumba Ltd Kigamboni Nyumba Ltd is a company dealing with real estates. They acquire land and develop Kigamboni Nyumba Ltd Kigamboni Nyumba Ltd is a company dealing with real estates. They acquire land and develop properties for resale. While auditing tangible non-current assets, the audit senior concluded that the value of eight housing units, representing 70% of the value of the company's total assets, which were constructed for resale, were reported as tangible non-current assets instead of inventory. The audit senior in charge of this audit recommended that qualified opinion be issued clearly stating that except for the value of the eight housing units the financial statements show a true and fair view. Comment on the suitability of the recommended audit opinions clearly stating the arguments for or against the recommendations