Question 5

Below are independent situations:

1. You are the auditor of ABC Sdn Bhd (ASB) and is performing the current year's audit. ASB has overvalued its closing inventory. The management has restated the inventory value after discussing with you. After going through the relevant documents and recomputed certain figures, you have agreed with the restatement.

2. The client company used the 'last in first out' method for valuing inventory. As the auditor, you have advised the client that the method is not allowed by the financial reporting framework. The management ignored your advice. This does not only materially affects the inventory but also has a pervasive effect on the financial statements.

3. There is a change in the management team of a client company, Apple Bhd. Due to the management change; the auditor is not allowed to go through the files that relate to sales, accounts receivable, inventory, and other important documents. The auditor is not satisfied with the evidence that he has obtained.

4. The client company has a financial year end 31 August 2018. On 12 September 2018, a fire occurred at the client's factory and destroyed half of the machineries that were used for production. The management has also complied with the regulatory reporting framework and the auditor has completed the field work and is satisfied with the financial statements.

For each of the situations given, you are required to determine the appropriate type of audit report and give reasons for your answers.

(10 Marks)