Auditing help needed?

Question

i have a few questions regarding an audit i am doing.
After looking at their accounts and environment, i have come up with some problems;
what happens if any inherent uncertainties come to light,
And what if the owner rejects our adjustments, what kind of auditing report would we give?

Its an assignment for college

Answer 1

If your audit adjustments arose from errors you discovered, there's no way management can disagree with you. But if your adjustments arose from uncertainties for which you cannot obtain assurance, e.g. value of investments, stock obsolescence, allowance for doubtful debts, amount of warranty to provide, etc, all of which involve a lot of judgement, I can imagine mgt would challenge them. You should take all proposed adjustments to your summary of unadjusted audit adjustments and assess the materiality of the total net amount.

If the amount is material to the financial statements, the type of qualification would depend on HOW material it is. If it merely distorts the receivables amount, then qualify just that portion, and give an "except for" qualification. If the amount touches on, say, stocks AND receivables AND investments, then by the time you say except for this and this and this, there's nothing left in the financial statements, in which case you might have to give an adverse opinion "the financial statements do not give a true and fair view...." or a total disclaimer of opinion "Because of the materiality of the uncertainties mentioned in the preceding paragraphs, we are unable to, and do not, express an opinion on whether....."

Answer 2

If you don't know these things, then you can't be the lead on this audit. There is obviously a partner in the audit firm to help you with these questions. You actually have to be the partner of the auditing company to issue a report.

If this is a homework question, you also know what type of audit report will be given. It will be a "qualified" report,
and if the company refused to make the adjustments you recommended and there seems to be a lot of things that are pervasive and material in nature, that make it impossible for you to determine if the books are prepared in accordance with generally accepted principles, you can issue a denial of opinion...

An auditor doesn't look at accounts. An auditor collects sufficient and appropriate audit EVIDENCE!!! In order to form opinions.

There is no such thing as "inherent uncertainties" in accounting.
If you mean contigencies, like a company is being sued, and you don't know how much they will lose, then those types of items are listed in the NOTES to the financial statements.

Answer 3

Inherent uncertainties- don't know what these are.

If they reject our audit adjustments and the financial statements are materially misstated, you would probably qualify your opinion.

Answer 4

You are an auditor and are asking us?