Question 3 Audit Reports 12 Marks The following are three independent situations. For each case, state the type of audit opinion that should be expressed and provide a brief explanation to justify your choice: a) A significant proportion of a retailers sales are on a cash basis and inadequate records have been maintained; there are no audit tests that can be done to satisfy yourself that the cash sales are accurate ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ (4 marks) b) The company that runs a dairy farm has prepared the financial report on a going concern basis; shortly after the year end the companys contract with a major supermarket was cancelled. Without this customer you expect the business to cease trading within six months and it is unlikely that the company will be able to secure any new contracts in that time ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ (4 marks) c) A wholesaler has a policy of including all of its buildings in the balance sheet at cost less depreciation. You establish that one of the warehouses included in the balance sheet at a value of $20m has an actual market value of $23m