Question
Listed below are five cases in which an auditor will determine the appropriate audit opinion to issue. Indicate the type of opinion the auditor should
Listed below are five cases in which an auditor will determine the appropriate audit opinion to issue. Indicate the type of opinion the auditor should express in each case and explain your answer.
Case A: The client restricted the auditor from observing the actual count of physical inventory. Inventory is a material item for the client and has a pervasive effect on financial statements.
Case B: The client's going concern is extremely doubtful and the problems facing the client are fully explained in the footnotes.
Case C: The client changed the method of depreciation from straight-line to double-declining balance. The effect of the change is material for the current year and subsequent years. The client is not willing to disclose the effect of the change in the method of depreciation on the current year.
Case D: The client company violated another company's patent in the process of producing its own products. The client refuses to disclose the information. Your estimate of the royalty payments required would be material to the financial statements.
Case E: Merck Pharma devoted its entire research and development (R&D) efforts this past year to developing and marketing a pill that could be used to treat COVID-19 infection. The costs, which were significant, were capitalized as R&D costs and will be amortized over the life of the pill. The auditor has concluded that the research to date will result in a marketable product. A full description of the R&D and the cost is included in a note to the financial statements. The note also states that the basic research costs are expensed as incurred and the auditor verified the accuracy of this statement.
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