Jessica Davis is considering investing in Carnival Australia Ltd (CAL), a large cruise ship company. Jessica has reviewed CALs 2018 audited financial report, which shows a net profit of $500 000 and a net asset position of $2 million. The auditors report is unmodified, stating that in the auditors opinion the financial report gives a true and fair view of the entitys financial performance and financial position. As a result, Jessica is now confident about her proposed investment in CAL, as she believes that the auditors report provides absolute assurance about the accuracy of the financial report, including the healthy profit and net asset figures, and there is no chance of the company going bankrupt. Further, while she is aware of the management frauds that have occurred in some companies in recent years, she is comforted by the fact that she believes that the unmodified auditors report means that no fraud has occurred within CAL.

Required:

Advise Jessica as to whether her conclusions about CAL are reasonable based on the audited financial report. Provide reasons for your opinion.