nancial information you determine that there is a material misstatement in the accounts receivable account of your client. This misstatement has also caused the sales revenue account to be materially misstated. You have notified the client about the misstatement but as of reporting date, client has not made any corrections. You also found misstatements in the fixed assets and accounts payable accounts, but they are not material as per your assessment. You found no other misstatements in the other accounts.
You are the audit partner of ‘Power Auditors’ and you are auditing your client ‘Freefall
Incorporated’.
After finishing all the tests on the client’s financial information you determine that there is a
material misstatement in the accounts receivable account of your client. This misstatement
has also caused the sales revenue account to be materially misstated. You have notified the
client about the misstatement but as of reporting date, client has not made any corrections.
You also found misstatements in the fixed assets and accounts payable accounts, but they
are not material as per your assessment. You found no other misstatements in the other
accounts.
In addition to this, you also notice that the client has a large amount of debt which will be
due next year. As the business has suffered a loss this year and does not have enough
flow
form of refinancing next year. Without this refinancing, there is a significant possibility that
the client may go bankrupt.
During your audit, you also noticed that the client’s policy of recognizing financial assets in
fair value is complex involving significant estimates. However, your independent
assessment revealed that these estimates are reasonably made.
Required:
Given the facts above, draft a complete audit opinion letter for your client following the
appropriate audit standards.
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