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The impairment loss andt receivables are $900,000 which leads to an loss of 325000. It was first profilet and after these adjustments then turns it into a loss.
If management refuses to modify the audit report then we issue a qualified report an adverse and pervasive opinion. This is because it is material profit to a loss.. answers just say its except for. ?
Can u give me a brief description of how you would know if it is pervasive. Except for. Adverse. Thats the only 3 types of report I think.“If management refuses to modify the audit report ….” is what you have written and it’s exactly that type of carelessness that will cost you dear in the exam room.
“Pervasive” is an adjective and is applied in two situations. If the unadjusted errors remain unadjusted and as a result the view given by the financial statements is misleading ie wrong then the affect on the audit report is that it shall be modified
The modification requires the auditor to express a qualified opinion, an adverse opinion – “…… the financial statements do not show a true and fair view …..”
But “pervasive” applies also to the situation where, as a result of the extent of the lack of sufficient, appropriate audit evidence, in the auditors’ view the financial statements are misleading ie meaningless. In this situation the auditor is required to modify the audit report and qualify their opinion by issuing a disclaimer – “……. we are unable to express an opinion ….”
Where the aggregation of errors is not so substantial as to warrant the description “pervasive” but are nevertheless “material” then a modified report is required from the auditor giving a qualified opinion – “Except for the matters referred to in the preceding paragraph(s) ……..”
You say there are only three reports.
There are two that require “except for” modified reports / qualified opinions but neither of them is pervasive (2)
There’s the disclaimer, explained above (+1 = 3)
And the adverse, also explained above (+1 = 4)
There’s an unmodified report, unqualified opinion (a clean opinion) (+ 1 = 5)
There’s a report that is modified but an unqualified opinion (an emphasis of matter) (+ 1 = 6)
You’re at P2 level here! To happily say that there are only three types of report is not demonstrating that you are at the advanced audit and assurance level!
Kerri, you must be more careful with your written English. Think before you write – and then, if you have time, read through what you have written to make sure that you’re not guilty of making careless errors
Now, to get to your post …… really I have already answered it! I agree with you! Something that changes profit into loss changes the whole aspect of the financial statements and would therefore be, in my mind, pervasive
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