Tag (SQ): Local legislation

You are the manager responsible for the audit of two, unrelated, audit clients. In each case you are currently reviewing the audit working papers and the audit seniors’ recommendations for the type of auditor’s report to be issued. Details are as follows:

(1) PrimeTech Laptops is a subsidiary of CoreTech Computers. Serious going concern problems have been noted during this year’s audit. PrimeTech Laptops will be unable to trade for the foreseeable future unless it continues to receive financial support from CoreTech Computers. A letter of support has been received and a copy is filed on the current audit file.
The audit senior has suggested that, due to the seriousness of the situation, the audit opinion should be modified.

(2) During the year, Rania Textiles has made a small loan to one of its directors but this has not been disclosed in the financial statements. Such disclosure is required by local legislation. Your auditor’s report gives an opinion on compliance with such legislation.
The audit senior has suggested that, as the amount involved is small, an unmodified opinion should be issued.

Required:
For each client, comment on the suitability or otherwise of the seniors’ proposals for the auditor’s reports. Where you disagree, indicate what kind of modification (if any) should be given instead