AnnaLisa, an auditor for N. M. Neal & Associates, is prevented by the management of Lileah Company from auditing controls over inventory. Lileah is a public company. Management explains that controls over inventory were recently implemented by a highly regarded public accounting firm that the entity hired as a consultant and insists that it is a waste of time for AnnaLisa to evaluate these controls. Inventory is a material account, but procedures performed as part of the financial statement audit indicate the account is fairly stated. AnnaLisa found no material weaknesses in any other area of the entity's internal control relating to financial reporting. What kind of report should AnnaLisa issue on the effectiveness of Lileah's internal control?

(a) Documentation and test controls over specific risk

(b) A disclaimer of opinion

(c) Controls that operate on a continuous basis

(d) Controls to monitor the inventory taking process.

Question

Business

Flakey

12 October, 15:01

AnnaLisa, an auditor for N. M. Neal & Associates, is prevented by the management of Lileah Company from auditing controls over inventory. Lileah is a public company. Management explains that controls over inventory were recently implemented by a highly regarded public accounting firm that the entity hired as a consultant and insists that it is a waste of time for AnnaLisa to evaluate these controls. Inventory is a material account, but procedures performed as part of the financial statement audit indicate the account is fairly stated. AnnaLisa found no material weaknesses in any other area of the entity's internal control relating to financial reporting. What kind of report should AnnaLisa issue on the effectiveness of Lileah's internal control?

(a) Documentation and test controls over specific risk

(b) A disclaimer of opinion

(c) Controls that operate on a continuous basis

(d) Controls to monitor the inventory taking process.

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Answers (1)

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Nicholas Zavala · Answer 1

(b) A disclaimer of opinion

Explanation:

A disclaimer of opinion -

It is the statement which is given by the auditor that no opinion is given for the client's financial statement.

There could be several reasons for this statement.

As, the auditor might have not been permitted or to complete all the planned audit process.

Hence, from the given information of the question, the correct term for the given situation is (b) A disclaimer of opinion.