You are the audit senior ofDyna Comp Ltd. (DCL) which has a year end December 31, 2019. DCL writes and develops computer software for sale to international computer manufacturers. Profit before tax for the year amounted to $490,000 on a net asset base of $3.45 million. The following issues have been identified as part of the year-end audit work.

Audit Issue 1: A substantial claim has been lodged against DCL arising from software sold to a customer in January 2019. The customer is claiming that the software supplied was flawed and resulted in a recall of certain computer models. No provision has been made for the compensation payable by DCL as it is not possible to estimate with reasonable accuracy the amounts, if any, which may become payable. The audit partner has agreed with this assessment and is satisfied that the compensation that may become payable cannot be assessed with reasonable accuracy at this point. The directors of DCL have included a note explaining this matter in the financial statements.

Audit Issue 2: A restructuring provision had been recognized in the financial statements of DCL for the year ended December 31, 2018, in respect of a reorganization to which DCL had committed itself at December 31, 2018. The provision was recorded at a total cost of $200,000 (reflecting total costs to be incurred over the two years to December 2020). Restructuring costs incurred in the current year amounted to $56,000 which was in line with the initial estimated provision. This amount was recorded as follows:

Dr Operating costs $56,000

CrBank$56,000

The audit manager has requested you to assist in formulating an appropriate audit opinion on the DCL financial statements as they are due to be approved by the directors of DCL in two weeks' time [pending resolution of the Audit Issues (1) and (2) noted above]. The audit partner responsible for signing the audit report is unavailable during this period.

Required:

(a) Assess the audit considerations arising from the claim made against DCL (Audit Issue 1 above), including any potential implications on the audit report.

(b) In respect of Audit Issue 2 only:

(i) Discuss the impact on the audit report; and

(ii) Outline the points (if any) to be included in a qualified audit report.

(c) Can the audit report be issued if the audit partner is unavailable when the DCL directors approve the financial statements? Discuss briefly.