Auditing Opinions and Scenarios

This assignment delves into the various types of audit opinions issued by auditors based on their examination of financial statements. It presents several hypothetical situations and asks you to determine the appropriate audit opinion for each scenario. The scenarios cover issues such as material misstatements, non-compliance with accounting standards, limitations on scope, and going concern concerns. By analyzing these cases, you will gain a deeper understanding of how auditors apply professional judgment in forming their opinions.

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Question 1........................................................................................................................................3
Situation [a].................................................................................................................................3
Situation [b].................................................................................................................................3
Situation [c].................................................................................................................................3
Situation [d].................................................................................................................................4
Situation [e].................................................................................................................................4
Situation [f]..................................................................................................................................4
Situation [g].................................................................................................................................5
Situation [h].................................................................................................................................5
Question 2........................................................................................................................................5
Situation [a].................................................................................................................................5
Situation [b].................................................................................................................................5
Situation [c].................................................................................................................................6
Situation [d].................................................................................................................................6
Situation [e].................................................................................................................................6
Situation [f]..................................................................................................................................6
Situation [g].................................................................................................................................7
Situation [h].................................................................................................................................7
References........................................................................................................................................8

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Question 1
Situation [a]
In the provided situation, it can be seen that Mortdate Accounting firm has provided all
the papers related to the audit of many public companies to Penshurts Accountants. APES 110,
Confidentiality, 140 states that it is the obligation on the auditors that they cannot disclose the
confidential information of the audit clients acquired at the time of providing professional
services. For this reason, by providing the audit papers of their clients, Mortdate Accountants
have violated the ethical principle of confidentiality (Houghton and Campbell 2013).
Situation [b]
It is the responsibility of the auditors to determine that whether his/her new professional
contract has negative effect on the fundamental principles of auditing. According to the provided
situation, Jan Dungog applies to a local firm by not informing her current employer and the local
firm appoints het by not informing her employees. This particular action of Jan Dungog has
violated the fundamental principle of auditing and poses discredit to the same. Thus, as per
APES 110, Professional Behavior, 150, this particular action of Jan Dungog has breached the
professional behavior principle of auditing (William Jr, Glover and Prawitt 2016).
Situation [c]
According to APES 110, Professional Behavior, Section 150, it is the responsibility of
the auditors to comply with the required laws and regulations related to auditing. APES 110
states that the auditors are not allowed offer any kind of additional services to the audit client
apart from the auditing services. Thus, as per APES 110, in this particular situation, Wendel

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Sailor have breached the ethical principle of professional behavior with his particular action
(Houghton and Campbell 2013).
Situation [d]
As per the principles of APES 110, auditors are required to determine whether their new
contract has any negative effect on the audit principles or not. In the provided situation, it can be
seen that Judith Durham is the member of Directors but does not involved in any kind of
management function. Thus, as per APES 110, this action of Judith Durham has not violate any
ethical principle of auditing (William Jr, Glover and Prawitt 2016).
Situation [e]
According to APES 110, Confidentiality, Section 140, the obligation is one the auditor
not to disclose the acquired information of the audit clients obtained while performing the audit
operations. In the provided situation, it can be seen that Ernie Dengate sells all of this accounting
papers containing information about the clients to Jago. Thus, this particular action of Ernie has
violated the confidentiality principle of auditing as per APES 110 (Marchetti et al. 2013).
Situation [f]
According to APES 110, the auditors are not entitled to provide any kind of additional
services to the audit clients apart from pre-determined audit services. As per the provided
situation, Fred Nerk is providing different types of services to his audit clients. Thus, this
particular action of Fred Nerk has breached the integrity principle of auditing as per APES 110,
Integrity, Section 110 (Everett and Tremblay 2014).

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Situation [g]
As per APES 110, Confidentiality, Section 140, the auditors are required to keep the
audit information in such a manner that the confidentiality of the information can be maintained.
In case of Allgood Chartered Accounting firm, it can be seen that they maintain the audit records
in a haphazard manner and it can affect the confidentiality of the information. For this reason, the
action of this company has breached the confidentiality principle of auditing as per APES 110
(Marchetti et al. 2013).
Situation [h]
According to APES 110, Professional Behavior, Section 150, it is the responsibility of
the auditors to maintain the professional behavior with the audit clients. In this case, it can be
seen that James Jameson’s actions are against the audit professional behavior. In addition, due to
this, his audit license had been suspended. Thus, this action has violated the professional
behavior principle of auditing as per APES110 (Everett and Tremblay 2014).
Question 2
Situation [a]
At the time of auditing, it is required for the auditors to obtain sufficient information
before issuing the appropriate audit opinion. In this situation, it can be seen that the auditors was
not able to obtain confirmation about eight major clients that has created obstacle for the audit
process. Thus, the auditor will issue Qualified Audit Opinion (Habib 2013).
Situation [b]
It is the responsibility of the organizations to provide the auditors with all the required
access necessary for audit operation. In this case, it can be seen that the auditors are not able to

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verify certain assets due to the client’s restriction. Thus, the auditor will issue Disclaimer of
Audit Opinion (Foroghi and Shahshahani 2012).
Situation [c]
In this case, it can be seen that the management of the company has not done necessary
disclosure about a contingent liability that can have material effect on the financial statements.
Due to this action, the auditor will issue Disclaimer of Audit Opinion due to lack of evidence
(Habib 2013).
Situation [d]
In this case, it can be seen that the auditors cannot do anything verify the basis of sales
due to the fault in internal control. Thus, in the lack of evidence, the auditor will issue
Disclaimer of Audit Opinion (Foroghi and Shahshahani 2012).
Situation [e]
In this particular case, it can be seen that the audit client has bared the auditor from
obtaining the opening balance of the accounts that can have material effect on the financial
statements. Thu, the auditor will issue Disclaimer of Audit Opinion in this case (Blankley, Hurtt
and MacGregor 2012).
Situation [f]
Companies are required to follow the required accounting standards for developing and
presenting the financial statements. In this case, it can be seen that the company has not followed
the Australian Accounting Standards and thus, the auditor will issue Adverse Audit Opinion
(Carson et al. 2012).

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Situation [g]
In this case, it can be seen that the effects of following the disallowed LIFO method can
only be seen on the inventory and it has no effect on other accounts. Thus, the auditor will issue
Qualified Audit Opinion by adding the reason of not being unqualified (Blankley, Hurtt and
MacGregor 2012).
Situation [h]
Auditors are only required to find out the material misstatements in the financial
statements and they do not have any responsibility on commenting on the going concern status.
Thus, the auditor will issue Unqualified Audit Opinion due to have no material misstatements
(Carson et al. 2012).

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References
Blankley, A.I., Hurtt, D.N. and MacGregor, J.E., 2012. Abnormal audit fees and
restatements. Auditing: A Journal of Practice & Theory, 31(1), pp.79-96.
Carson, E., Fargher, N.L., Geiger, M.A., Lennox, C.S., Raghunandan, K. and Willekens, M.,
2012. Audit reporting for going-concern uncertainty: A research synthesis. Auditing: A Journal
of Practice & Theory, 32(sp1), pp.353-384.
Everett, J. and Tremblay, M.S., 2014. Ethics and internal audit: Moral will and moral skill in a
heteronomous field. Critical Perspectives on Accounting, 25(3), pp.181-196.
Foroghi, D. and Shahshahani, A.M., 2012. Audit firm size and going-concern reporting
accuracy. Interdisciplinary Journal of Contemporary Research in Business, 3(9), pp.1093-1098.
Habib, A., 2013. A meta-analysis of the determinants of modified audit opinion
decisions. Managerial Auditing Journal, 28(3), pp.184-216.
Houghton, K. and Campbell, T., 2013. Ethics and auditing (p. 354). ANU Press.
Marchetti, D., Spagnolo, A., Cicerone, M., Cascini, F., La Monaca, G. and Spagnolo, A.G.,
2013, September. Research ethics committee auditing: The experience of a university hospital.
In HEC forum (Vol. 25, No. 3, pp. 257-268). Springer Netherlands.
William Jr, M., Glover, S. and Prawitt, D., 2016. Auditing and assurance services: A systematic
approach. McGraw-Hill Education.

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