Reference no: EM132921214

Question - You are the partner in charge of five clients which all have March 31 year-ends. Each of the audits has now been completed and you are currently reviewing the files of audit work and need to decide on the appropriate audit opinion in each case.

Client A: suffered a serious decline in sales after alarm in the media about the safety of its products. It required extra short-term funding from the bank to pay creditors. Sales continued to fall after the year-end. There is no possibility of shareholders contributing more capital. The financial statements have been drawn up on the going concern basis. The directors refuse to disclose anything about the liquidity crisis.

Client B: a computer malfunction resulted in the loss of some of its accounting records relating to one of its branches. There is no back-up or other datarecovery method available. The area involved is considered material but not fundamental to the financial statements.

Client C: the audit team discovered a number of minor discrepancies that together produce an understatement of 0.5% of net income. The draft financial statements have been sent to the printers and the chief financial officer refuses to adjust the figures.

Client D: your firm were appointed during the year after the previous audit firm resigned suddenly. It is not possible within the budget to audit the brought forward figures from the previous year.

Client E: is in the process of restructuring. It needs additional loans and is currently seeking out potential lenders. The directors consider that a lender will be found and have drawn up the financial statements on the going concern basis; they have made a full disclosure in the notes to the financial statements with which you cannot find fault.

Required -

a) For each client, indicate which type of audit opinion should be given and explain your reasoning.

b) In addition to the opinion paragraph, what other information can readers expect to see in the auditors' report on financial statements?