QUESTIONS -
PART A - Santa Ltd, a public company, has just prepared general purpose financial statements for the year ended 31 December 2015 and has appointed you as the auditor of the company. However the accounting department was heavily understaffed and as a result of this the transactions were not entered promptly and reconciliations were not performed. Therefore Santa Ltd did not keep appropriate books and records, and the audit has been extremely difficult this year. In an attempt to sort out the problems, temporary accounting staff was employed from a recruitment agency but they were unable to reconcile even the bank account at the year end. After carrying out the audit procedures you are not satisfied that all transactions that occurred during the year are reflected in the financial report.
REQUIRED - Assuming the matter remains unresolved, identify and explain the audit opinion that should be issued for Santa Ltd for the year ended 31 December 2015.
Part B - As the auditor of Clause Ltd, a public company, you have identified a material misstatement in the property, plant and equipment account balance as at 31 December 2015. The depreciation rates for property, plant and equipment used by Clause Ltd have not changed for the past five years even though there have been recent technologically changes that have convinced you that the useful life and the residual value of a number of assets need to be adjusted downwards. Clause Ltd's directors argue that changing it will conflict with consistency.
REQUIRED - Assuming the matter remains unresolved, identify and explain the audit opinion that should be issued for Clause Ltd for the year ended 31 December 2015.