Question

b. Your auditing firm, Miller CPA, completed the December 31, 2017 audit of Parker Company on February 9, 2018. Parker Co. is planning on releasing its financial statements, along with the Miller's opinion on the financial statements and internal control over financial reporting, on February 15, 2018. On February 12, 2018, a flood in one of Parker's warehouses in the Gulf Coast region, destroyed over $15 million of inventory. While the extent to which this loss is recoverable through Parker's insurance is uncertain at this time, Miller CPA believes that this loss could have a material impact on Parker's financial condition and results of operations.

For the situation above, describe the most appropriate course of action that should be taken by auditors. Cite the relevant professional standards that apply to the situation.

Answer 1

Answer. In this case Miller CPA firm should issue qualified audit report to shareholder of Parker company because company big material amount of inventory destroyed and loss due to flood and also uncertain to recoverable from Insurance Company. This situation badly affected company’s going concern concept. Parker Company should also disclose these facts through note to accounts. So that financial statement stockholder’s can take correct decision based on it