Question

Misstatements identified

Description	Amount	Management Action
One of SYL’s pharmaceutical customers is experiencing severe cash flow difficulties and is unable to pay the amount owing to SYL.There has been no provision/allowance for doubtful debts raised for this debtor in the financial statements for the year ended 31 March 2020. SYL’s legal adviser stated in a telephone call that that the probability of any funds being received from the debtor is remote.	$50,000	Management disagreed with the advice from the legal adviser and believe that they will be able to receive the money from the customer. As such, they have not corrected the accounts in the final Financial Statements.
One supplier’s invoice was not recorded in accounts payable, understating inventory and accounts payable.	$3,669	None

With regards to the misstatements identified, state the audit opinion that would need to be provided in the Audit Report. Justify your answer.

Answer 1

As the Misstatments identified by the auditor are Material & they are Pervasive. The auditor has to Provide has to Adverse Opinion as the Management has not had taken any steps to disclose or correct the Misstatements identified.

Adverse Opinion is Appropriate to issue for the Identified, Uncorrected Misstatements.