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Hello.
My question is regarding materiality.
A firm that has materiality set at 25K and already has an uncorrected 13K mistatements which the management isn’t likely to correct.
The auditors now discover that the firm has no clue of assets worth 50K and cant perform any proceedures relating to those assets but its an isolated issue.So will they issue a disclaimer of opinion or modify the report with a basis for opinion paragraph?
What i thought is that the firm is small (as the materiality is set at 25K) and 50K would be a huge amount for such company with no evidence thus it should be shown as a disclaimer.
I would like to hear your opinions.
TIA.Please see the answer I posted here https://opentuition.com/topic/dec-2016-cbe-auditors-report-how-is-tp-not-pervasive
Pervasive is not a “degree of materiality” – it means the issue affects the financial statements as a whole.
If the assets are all of one category – say equipment (it would be rather difficult to “lose” property) a qualified audit opinion will convey that “equipment should be x and profit should be y” – so the reader can quite understand the impact that inability to audit $50k has.
It does not affect other receivables/payables/cash/revenue/share capital etc – so is not pervasive.
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