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Business Studies

Modern Techniques of Managerial Control

The inventory...

Question

The inventory consists of about one per cent of all assets. The client has imposed restriction on auditor to prohibit observation of stock take. The auditor cannot apply alternate audit procedures. Auditor will give __________.

A

Unqualified opinion

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B

Qualified opinion

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C

Disclaimer of opinion

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D

Adverse opinion

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Solution

The correct option is A Unqualified opinion
Qualified opinion is one where based on sufficient and appropriate evidences, auditor concludes that the misstatements are material and not pervasive in nature to the financial statements.
In the given question, inventory only consists of one percent of all the assets, which does not have a material impact on overall financial situation of the entity.
Hence, even though restriction has been imposed on observation of stock taking, considering the materiality, auditor shall give an unqualified opinion.

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