Question:
1) For each of the subsequent independent situations relating to the audit of internal controls, show the reason for and the kind of audit report you would issue. That is, as well as giving the kind of opinion you would issue, also show any other modifications to the report you would make, if any.
a) In the audit of Wood Pharmaceuticals, you are surprised to find various control deficiencies in the company's internal controls. You evaluate that there is a reasonable possibility that any one of them could result in a misstatement that is significant. Though the odds are extremely low that the deficiencies, singly or taken together, can results in a material misstatement of the company's financial statements, the large number of problems causes you concern. Management's written assessment concludes that the company's controls were efficient as of the report date.
b) You agreed to perform an audit for Rodriguez & Co. after the client's year-end. Due to time limitations, your audit firm could not do a full audit of internal controls. Thus, the evidence you did collect suggests that the company has exceptionally strong controls. You critically doubt that a material weakness would have been found if time had permitted a more thorough audit. Management's written assessment concludes that the company's controls were efficient as of the report date.
c) Reynolds' Distilleries identified what you agree is a material weakness in internal controls and made an adverse assessment in its report on controls. The company had not corrected the material weakness as of the end of the reporting period.