Analysis of Auditing and Assurance Report on Financial Statements

This report provides an analysis of auditing and assurance practices, specifically focusing on the different types of audit opinions. The report examines three scenarios: Connor Company, where an unqualified opinion is appropriate due to the company's adherence to accounting standards despite debt concerns; a situation requiring a qualified opinion because of the use of LIFO instead of FIFO; and Victorian Manufacturing, where a disclaimer of opinion is necessary due to insufficient audit evidence regarding the valuation of a factory. The report highlights the importance of accounting standards, the impact of material misstatements, and the role of auditors in providing reliable financial information. The report also includes a list of references for further reading.

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

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Table of Contents
Question 3........................................................................................................................................2
Situation [a].................................................................................................................................2
Situation [b].................................................................................................................................2
Situation [c].................................................................................................................................3
References........................................................................................................................................4

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Question 3
Situation [a]
The auditors use to provide Unqualified audit opinion when they become sure from
conclusive audit evidences that the financial statements are presented fairly and they have been
prepared by complying with the required accounting standards and principles (Mock et al. 2012).
In case of Connor Company, it can be observed that the company is relying on bank overdraft
heavily for debt repayment due to weak debt position. However, the auditors have not found any
material misstatements in the financial statements of Connor Company. It implies that the
company has prepared their financial statements by complying with required accounting standers
and has fairly presented them. Thus, the auditors will issues unqualified audit opinion for Connor
Company.
Situation [b]
The auditors issues Qualified audit opinion when the financial statements are prepared by
not complying with the appropriate accounting standards and principles (Ittonen 2012). In case
of this provided situation, it can be seen that the company has not complied with the country’s
required accounting standards as they have been following LIFO instead of FIFO and this
difference has affected the materiality of the company related to inventory. However, there is not
any material misstatement in any other areas of financial statements. For this reason, the auditors
will issue qualified audit opinion and will add an extra paragraph highlighting the reasons for not
being unqualified.

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Situation [c]
The auditors use to issue Disclaimer audit opinion when they are unable to obtain
sufficient audit evidences and that evidences could have material effects on the financial
statements (Cullinan et al. 2012). In case of the Victorian Manufacturing company, it can be seen
that the directors have not done the valuation of their Melbourne plan for five years as they have
assumed that there has not been any instability in the fair price of the company in these five
years. It needs to be mentioned that the financial statements of the company will be materially
affected in case there is huge gap in the carrying value of the Melbourne factory and the fair
market value. It can be seen that the auditor are unable to get sufficient audit evidences. Thus,
the auditor will issue disclaimer of audit opinion for Victorian Manufacturing Company.

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References
Cullinan, C.P., Wang, F., Yang, B. and Zhang, J., 2012. Audit opinion improvement and the
timing of disclosure. Advances in Accounting, 28(2), pp.333-343.
Ittonen, K., 2012. Market reactions to qualified audit reports: research approaches. Accounting
Research Journal, 25(1), pp.8-24.
Mock, T.J., Bédard, J., Coram, P.J., Davis, S.M., Espahbodi, R. and Warne, R.C., 2012. The
audit reporting model: Current research synthesis and implications. Auditing: A Journal of
Practice & Theory, 32(sp1), pp.323-351.

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