Question
On April 14, 2020, your CPA firm completed the fieldwork for the audit of Dhofar Beverages financial statements for the year ended December 31, 2019.
On April 14, 2020, your CPA firm completed the fieldwork for the audit of Dhofar Beverages financial statements for the year ended December 31, 2019. Dhofar Beverages is a privately held company. Last year, your firm expressed an unqualified opinion on Dhofar Beverages 2018 financial statements.
PwC, CPAs, performed the audit of the December 31, 2019 and 2018 financial statements of Dhofars Supply Company, a consolidated subsidiary of Dhofar Beverages. PwC completed the fieldwork on February 25, 2020, and issued its unqualified opinion on Dhofars Supply Company on March 2, 2020. Dhofars statements reflect total assets of OMR950,000 and OMR900,000 as of December 31, 2019 and 2018, respectively, and revenues of OMR1,845,000 and OMR1,650,000 for the years then ended.
During your audit, you obtained the following information which does not appear in the footnotes to Dhofar Beverages 2019 financial statements:
During 2020, Dhofar Beverages changed its method of valuing inventory from the First-In-First-Out method to the Last-In-First-Out method. Dhofar Beverages management believes the change provides a better matching of revenues and expenses, with which you concur. The change reduced ending inventory in 2020 by OMR248,000 and net income by OMR129,000. The effect of the change on 2020 is considered material, but not highly material. The effect of the change on prior years is immaterial.
Required:
Prepare the shared audit report to accompany Dhofar Beverages 2019-2018 comparative financial statements. Include the report title, address, body, date, and your signature.
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