C Modbury Ltd has prepared financial statements on time but

C. Modbury Ltd has prepared financial statements on time, but has also decided to exclude the cash flow statement, Management explains to the auditor that the users of their financial statements find that statement to0 complicated and consequently, they have it from the Annual Report. (2 marks) particular financial decided to exclude D. You are auditing XYZ Lid, an ASX isted company with several subsidianes issued a Another auditor was used to audit a subsidiary, ABC Pty Ltd, and modified opinion accounts of ABC are not considered material to the financial the economic entity. (2 marks) on its accounts in relation to inventory valuation. The statements of E. The client, Toys-For-You Ltd refused to undertake a physical inventory its \"new inventory management system is pertect and count, arguing that there are unlikely to be any major mistakes in the records. However, the audit procedures reveal a number of weaknesses in the new system. Inventory is a material amount in the financial statements. (2 marks) For each of the above situations you are required to indicate the type of audit opinion you would issue, as well as the reasons for issuing the particular audit opinion. Required: Section (C

Solution

Audit opinion in simple terms means the opinion of the auditor framed after audiitng the financials of the company which he presents to the users of those financial statements so they can make informed decisions. In the above cases:

C. Auditor shall issue adverse opinion as CFS is one of the mandatory financial statements along with Stt of Financial Position and Stt. of Income and Expenses. However company has not prepared it which is against the basic policies laid down by IFRS

d. Auditor in this case may give Diclaimer Opinion that though he has not audited the subsidiary\'s books but the auditor which did issued the modified opinion on the inventory valuations. Disclaimer Opinion is issued when the company is not ablet to perform audit procedures which may or may not have effect on the audit opinion but it is necessary to mention them in the report.

E. Auditor shall issue a Qualified Opinion because he is not allowed to audit the inventory count which is a material item in financial statements and he had reasons of flaws in the inventroy system based upon the audit procedures.

Hope this helps you mate!