Review the following independent auditors’ report: To the Board of Directors and Shareholders Company XYZ "We have audited the accompanying balance sheets of XYZ Company as of December 31, 2020, 2019 and 2018, and the related statements of income, retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the Caribbean. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion."
Review the following independent auditors’ report:
To the Board of Directors and Shareholders Company XYZ
"We have audited the accompanying balance sheets of XYZ Company as of December 31,
2020, 2019 and 2018, and the related statements of income,
for the years then ended. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the Caribbean. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement.
An audit includes examining, on test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion."
Required:
1. Identify the different sections of the Audit Report above. What sections are missing?
2. Complete the report using an unqualified opinion
3. After you have drafted the report as above, the following information was communicated
to you by the firm’s lawyer. A substantial claim has been filed against the company by a
major customer. No provision has been made for legal costs or compensation payable. There
is no indication of what the judgment may be. The directors have received advice from the
lawyer that the claim can be successfully defended. How will this affect the audit report you
are drafting?
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