USSION QUESTIONS AND PROBLEMS 24-20 (OBJECTIVE 24-1) Below are excerpts from the independent auditors' report to the members of Tesco PLC. Explain why each of the following phrases or clauses is used rather than the alternative provided: a. "In our opinion, financial statements of Tesco PLC's parent company give a true and fair view of the state of the parent company's affairs as at 28 February 2015" rather than "In our opinion, financial statements of Tesco PLC's parent company give an accurate view of the state of the parent company's affairs as at 28 February 2015." MPLETING THE AUDIT which you will recommend an appropriate audit report 24-22 (8ECTIVES 244, 24-5, 246, 24-7, 24-6) The following are independent 1. Subsequent to the date of the financial statements as part of this posible date audit procedures, a CPA learned that a recent fire caused by dem described the event in detail. The financial statements and foot by of a client's two plants: the loss will not be reimbursed by it. The the client did not disclose the loss caused by the fire. 2. During the course of his audit of the financial statements of a confo purpose of expressing an opinion on the statements, a CPA is need permis sions of the board. The corporation secretary instead offers to give the CPA Inspect the minutes of board of directors' meetings that documento copy of all resolutions and actions involving accounting matters 3. A CPA is engaged in the audit of the financial statements of a large mancing company with branch offices in many widely separated cities. The Chwas not to count the substantial undeposited cash receipts at the close of business on the last day of the fiscal year at all branch offices. ceipts, the CPA observed that deposite sin tener esta barn from the year and bank reconcili As an alternative to this auditing procedure used to verify the accurate cutofocus He was satisfied as to the cutoff of cash receipts by the use of the alternative procedere ation appeared as credits on the barik statement on the first business day of the sew you 4. On January 2, 2020, the Retail Auto Parts Company received a notice from its primary supplier that effective immediately, all wholesale prices will be increased by 10 percena On the basis of the notice, Retail Auto Parts revalued its December 31, 2019, inventory do reflect the higher costs. The inventory constituted a material proportion of total is sets, however, the effect of the revaluation was material to current assets but not to total assets or net income. The increase in valuation is adequately disclosed in the footnotes. 5. A CPA has completed her audit of the financial statements of a bus company for the year ended December 31, 2019. Prior to 2019, the company deprecated its buses ove a 10-year period. During 2019, the company determined that a more realistic est- mated life for its buses was 12 years and computed the 2019 depreciation on the basis of the revised estimate. The CPA has satisfied herself that the 12-year life is reasonable The company has adequately disclosed the change in estimated useful lives of its buses and the effect of the change on 2019 income in a note to the financial statements. 6. E-Lotions.com, Inc., is an online retailer of body lotions and other bath and body supplies. The company records revenues at the time customer orders are placed on the website, rather than when the goods are shipped, which is usually two days after the order is placed. The auditor determined that the amount of orders placed but not shipped as of the balance sheet date is not material. For each situation, do the following: 1. Identify which of the conditions requiring a deviation from a standard unmodified opinion audit report is applicable, if any. b. State the level of materiality as immaterial, material, or highly material. If you cannot de- cide the level of materiality. state the additional information needed to make a decision. Given your answers in parts a, and b. state the appropriate audit report from the fol lowing alternatives if you have not decided on one level of materiality in part b, state the appropriate report for each alternative materiality level): ) Unmodified opinion-standard wording 1) Unmodified opinion-nonstandard report wording Unmodified opinion-explanatory paragraph 9 Qualified opinion GAAP departure Qualified opinion-scope limitation Disclaimer D) Naverse NOO , American Institute of Certified Public Account In- Discu 24-23 (OBJECTIVES 24-4, 24-5, 24-6, 24-7, 24-8) Consider the following independent situations: a. Thomas Cheung is auditing the accounts of a manufacturing company that is head- quartered in Hong Kong and operates facilities in Mainland China and Vietnam. As some of the components that the company manufactures are for sensitive govern- ment contracts, the local governments in China and Vietnam do not allow outsiders, not even Thomas Cheung or his representatives, to access those premises. Instead, a government auditor provides a summary of the inventory contained in the ware- house and manufacturing facilities. Thomas believes that the inventory valuation represents a major part of the financial statements for the company. b. Rock Pool Design is an advertising services provider in Melbourne, Australia. The company recently discovered that the design of their offices is making some of the materials wear down faster than anticipated. As a result, the company switched to the accelerated depreciation method from the straight-line method. The value of Rock Pool Design's head office is substantial, so the auditor believes that the change in accounting method is material. c. Principessa Clothing is a clothing manufacturing company in Italy, specializing in children's formal wear. Principessa produces several lines of clothing. Due to the high cost of production for their babies and infant line of products and a recent fall in demand, the auditor for Principessa is unsure whether this division of the company will have sufficient funds to fulfill its debt obligations and other expenses in the next fiscal year. The auditor also believes that the babies and infant line is immaterial to Principessa's total assets and liabilities. d. Premier Investments is a dominant investment bank in Ireland. Because of its size and expertise, it conducts investment business over a large part of Ireland's business and financial sector, including most of the major auditor firms. The auditor currently auditing Premier Investments initially believed his firm was independent of the busi- ness of Premier Investments but discovered that the spouse of one of his associates holds Premier's investment products. The auditor believes that the total amount of these investments is immaterial. c. Danielle Chong is auditing the financial statements for Tiger Catering Company, which is based in Singapore and provides food and beverage services for weddings and cor- porate events. For simplicity, Tiger Catering's accountants do not use the allowance method for recording bad debt expense as required under GAAP. Danielle believes that doubtful accounts represents a material portion of the liabilities of the company, but it does not have a significant impact on the rest of the financial statements. For each of the above situations, indicate whether a departure from a standard unmodi- Req fied audit opinion or an explanatory paragraph is required. If yes, also indicate the type of modification or explanation the auditor should report. a