Question Tag: Basis of Opinion

You are the Manager-in-charge of the audit of Moonshine Limited. Your auditor’s report for the financial year ended December 31, 2019, was signed without modification in February 2020. The scope of the audit for the year ended December 31, 2020, has been limited because the company’s Chief Executive Officer fled the country in April 2020, taking the accounting records with him.

You have identified a valuable training opportunity for Richard, a member of your audit team. As a training exercise, you have asked Richard to draft the extracts for the basis of opinion and opinion paragraphs that may not be standard wording in an unmodified auditor’s report.

Richard’s draft extracts were produced as follows:

• Basis of Opinion (extract)
  “However, the evidence available to us was limited because accounting records were missing from early in the year and it was not possible to reconstruct them completely.”
• Opinion (extract)
  “Because of the possible effect of the limitations in the information available to us, we do not express an opinion on the financial statements.”

Required:

1. Discuss the principal matters relevant to forming an appropriate opinion on the financial statements of Moonshine for the year ended December 31, 2020. (8 Marks)
2. Evaluate the suitability of Richard’s draft extracts. (2 Marks)