Question 3 (37 marks) "In our opinion, the financial statements give a true and fair view of the state of the Company's affairs.... and have been properly prepared in accordance with the Hong Kong Companies Ordinance." (a) (1) Name the above opinion. (2 marks) (ii) One condition for issuing the above opinion is to require all financial statements to be presented and included. List three other required conditions. (6 marks) (b) (i) Under each of the three conditions listed in your answer in a(ii), suggest all the possible opinion(s) that the auditor may give when the condition is not met. (5 marks) (ii) State and explain the factor an auditor considers when choosing between the possible opinions in each condition? How does it affect the auditor's decision? (4 marks) (c) The auditor found that a client has switched the inventory valuation method from weighted average method used last year to First-in-first-out method this year, and the effect is material to this year's financial statements. (1) What should the auditor consider when deciding on the suitable opinion? (4 marks) (ii) Suggest the possible opinions and explain the situations that give rise to each opinion. (6 marks) (d) (i) Auditor's report is often called Independent Auditor's Report. Why is independence important to the auditor? Explain the specific independence requirements. (6 marks) (ii) Give an example that the auditor may violate the independence requirements and suggest the possible safeguard the auditor should take. (4 marks)