Best Assignment on Auditing and Assurance

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
Name of the Student
Name of the University
Author’s Note

AUDITING AND ASSURANCE1
Table of Contents
Answer to Question 1.................................................................................................................2
Requirement (A).....................................................................................................................2
Requirement (B).....................................................................................................................2
Answer to Question 2.................................................................................................................2
Requirement (A).....................................................................................................................2
Requirement (B).....................................................................................................................3
Answer to Question 3.................................................................................................................3
Requirement (A).....................................................................................................................3
Requirement (B).....................................................................................................................4
Answer to Question 4.................................................................................................................4
Requirement (A).....................................................................................................................4
Requirement (B).....................................................................................................................5
References..................................................................................................................................6

AUDITING AND ASSURANCE2
Answer to Question 1
Requirement (A)
Adverse audit opinion is provided in the presence of material misstatements that is
pervasive in nature in the financial reports. Beast Ltd has been using the last-in first-out
methods for ending inventory valuation and inventory is a significant balance sheet account
for the firm. Moreover, inventory account has been materially affected due to the difference
in first-in first-out method and last-in last-out method. Therefore, the audit manager of
FairAudit needs to issue adverse audit opinion since the use of last-in first-out method and
the difference can create material misstatements that is pervasive in nature.
Requirement (B)
The difference between first-in first-out and last-in last-out method of inventory
valuation has materially affected the balance of ending inventory of Beast Ltd. This material
impact can contribute to pervasive material misstatements in the financial reports of Beast
Ltd associated with inventory valuation. Moreover, last-in first-out is a restricted method of
inventory valuation in Australia as prescribed in AASB 102. As mentioned in AASB 102, the
current cost of inventory is not reflected from the rest of the inventory at the year’s end under
last-in first-out method and it ends up in wrong inventory valuation (aasb.gov.au 2020).
Therefore, Beast Ltd has not complied with the inventory valuation principles of AASB and
the difference is material difference as well as pervasive. All these reasons require the issue
of adverse audit opinion by the audit manager of FairAudit.
Answer to Question 2
Requirement (A)
External auditors issue the qualified audit opinion that is one type of modified audit
opinion when material misstatements are there in the financial reports but they are not