“Subsequent to the date of the financial statements as part of his post-balance
ID: 2334288 • Letter: #
Question
“Subsequent to the date of the financial statements as part of his post-balance sheet date audit procedures, a CPA learned that a recent fire caused heavy damage to one of a client’s two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. The financial statements and footnotes as prepared by the client did not disclose the loss caused by the fire.” Does the preceding condition require a deviation from or modification of an unqualified standard report? What is the level of materiality: immaterial, material, highly material? If you cannot state the level of materiality then state the additional information you would need to determine materiality. Given your preceding answers state the appropriate audit report for the situation.
Explanation / Answer
condition:-
“Subsequent to the date of the financial statements as part of his post-balance sheet date audit procedures, a CPA learned that a recent fire caused heavy damage to one of a client’s two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. The financial statements and footnotes as prepared by the client did not disclose the loss caused by the fire.”
level of materiality:-
material
type of audit opinion:-
GAAP department (material )issue qualified opinion with “except for” GAAP departure.
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