Question 2 Audit Report 20 Marks 1. In terms of ISA (NZ) 705- Modifications to the Opinion in the Independent Auditor's Report, explain the term 'modified' and 'three modified opinions" (5 marks) 2. Telco is a listed telecommunications company in New Zealand. Telco is a highly geared company due to its large borrowing to pay for a licence to operate a mobile phone network. During the last three years Telco's share price has dropped by 50% and there have been several changes of senior management during that period. Two companies made offers to merge with Telco, however due to drop in share process, the bidders pulled out of the deal. The company has sufficient Net Assets but planning to cut its capital expenditures and restructure its finances. All these matters have always disclosed in the financial statements. Deterioration in circumstances in the current year is no worse than it has been in previous years. No reference has been made to the going concern status of the company in previous auditor's reports on financial statements. Required Suggest the appropriate audit opinion for Telco. Provide reasons for your answer. Note: A written audit opinion is not required (5 marks) Te Anu is a small and medium winery located in New Zealand. You have been appointed as the auditor of Te Anu for the year ended 31 December 2020. The following points have arisen on the audit. Depreciation had not been provided on any non- current asset for a number of years, the effect of which if corrected would be to turn an accumulated profit into a significant accumulated loss. b. You were appointed as the auditors after the end of the financial year of Te Anu. Consequently, the auditors could not attend the year-end inventory count. Inventory is material to the financial statements. Required Suggest the appropriate audit opinion for Te Anu. Provide reasons for your answers. Note: A written audit opinion is not required. (10 marks)