Discuss the most appropriate type of opinion auditor issue

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Question - Company A has 20% inventory held by Just Department Store on a consignment basis. Confirmation request was not allowed to be sent to Just Department Store by Company A. You were only given the consignment agreement. Inventory represents 30% of the total asset.

Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost.

Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion and draft the opinion paragraph and any corresponding basis of opinion paragraph (if any).

Effects on financial statements from any violation on the accounting standards should be calculated and stated in the basis of opinion paragraph if applicable. Assume tax rate of 10% when necessary.

Reference no: EM132847068

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