Question

Identifies the appropriate type of audit report from the list below (a. through f.) and briefly explain the rationale for selecting the report.

Appropriate type of audit report:

Unqualified, standard

1. Unqualified, explanatory paragraph

2. Qualified opinion because of departure from GAAP

3. Qualified scope and opinion

4. Disclaimer

5. Adverse

Audit Situations:

During the audit of a large manufacturing company, the auditor did not observe all locations of physical inventory. The auditor chose a random number of sites to visit, and the company’s internal auditors visited the other sites. The auditor has confidence in the competence and objectivity of the internal auditors. The auditor personally observed only about 20% of the total inventory, but neither the auditor nor the internal auditors noted any exceptions in the inventory process.

Answer 1

Answer = 1 unqualifies, explanatory paragraph

Explanation:

As the auditor has personally verified a number of location and the remaining location were verified by the internal auditor , so auditors has done a reasonable degree of checking from their side . furthur , statutory auditor has confidence in the competence of the internal auditor.

If the auditor has checked all possible evidences to their knowledge and have not found any exception and are satisfied than they should give a unqualified report.