Problem:
YRS, Incorporated Balance Sheet
Year Ended December 31, 2006
Cash 100
Accounts Receivable 200
Total Assets 300
Accounts Payable 150
Capital Stock 100
Total 250
YRS Incorporated Income Statement for the Period ending December 31, 2006
Net Sales 500
Cost of Goods sold 100
Gross Profit 400
SG&A 200
EBIT 200
Income Tax Expense 100
Net Income 100
The information presented above is the financial statements provided by the client. You are the senior auditor of a Big 4 audit firm and the partner in charge of the engagement has asked you provide an opinion on the financial statements presented above. The partner has asked you, in the interest of time, to prepare a short memo (not the formal audit report) to the client as he has a meeting with the CFO of YRS Incorporated. Your memo should include what type of opinion that would be rendered given the information stated above. In addition, you are required to provide specific support for your conclusions.