The following are independent and material situations:

i.              An auditor hires an expert to review the net-realisable value of a client’s highly specialised inventory at year end. Inventory on hand accounts for 25 percent of the client’s current assets and 10 percent of total assets. The expert reports that a material impairment to the inventory value would be appropriate. The client disagrees and refuses to make an adjustment.

ii.             A customer of your audit client recently filed a voluntary bankruptcy petition. Your client refused to make the necessary adjustment to the customer balance owing to reduce the recorded value to its estimated recoverable amount. Your audit procedures discovered that the appointed liquidator estimated the recoverable amount to be approximately 20 percent of the recorded amount. You are of the opinion the event will cause substantial cash flow problems to your client.

iii.            An auditor is engaged after year end to audit a client’s financial report. As a result, the auditor could not attend the physical year-end inventory count. The accounting records are not sufficiently reliable to enable the auditor to perform alternative audit procedures to satisfy themselves as to the year-end inventory balances.

iv.           A client changes its method of accounting for the cost of Work-In-Progress inventories from FIFO to the weighted average. The auditor’s audit procures found that the weighted average method of valuation does approximate the FIFO method of valuation. However, the change has a material effect on the financial report and has not been disclosed.

v.            As a result of the Covid-19 pandemic, an auditor has decided that a Tasmanian client in the tourism industry will not be able to continue as a going concern after the government incentives are discontinued. The client has adequately disclosed its financial difficulties in a note to its financial report as well as the director’s report. The financial statements do not include any adjustments that might result from the client going insolvent or ceasing to trade.

Required

for each of the above situations:

a.            Evaluate the results of the audit procedures in each instance, and explain the type of audit opinion you would issue (refer to relevant auditing standards)

b.            Interpret the auditing standards and provide reasons for issuing the particular ‘level’ of audit opinion (refer to relevant auditing standards).