Question No 17:
MX suffered a major fire in its central warehouse on 14 March 2014. Inventory held in the warehouse with a value of $700,000 was either damaged or destroyed. An external audit of MX’s financial statements discovered that the loss had not been recognized in MX’s financial statements. This is regarded as material but not pervasive.
What type of audit report should the auditor issue for MX’s financial statements for the year ended 31 March 2014?
A. A modified report, with a qualified opinion based on insufficient appropriate evidence.
B. A modified report, with a qualified opinion, with a qualified “except for” opinion.
C. An unmodified report with an unqualified opinion.
D. An unmodified report with an emphasis of matter paragraph relating to the inventory.
Answer: B
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