[Anonymous]

there is a Becker Question:

If the auditor is unable to form an opinion on a new clients’ opening inventory balances, the auditor will issue an opinion on the closing balance sheet only and will issue a disclaimer of opinion on the statement of incomes, retained earning and cash flows.

Can anyone explain to me why auditor issues an opinion on closing balance sheet ONLY? or anyone is also using Becker book tell me which page I can refer to this question?

Many Thanks!!!!!

[Amay]

I ran into the same question.

BEC: 73, 81
AUD: 85
FAR: 71, 77
REG: 74, 75...finally DONE! 😀

*This is my 2nd attempt at the CPA exam. For all of you who have failed this exam many times, given up on it, or taken a break like me, remember that it is still possible to finish what you started...failure is the opportunity to begin again more intelligently 🙂

[Anonymous]

If we as the auditor cannot verify the opening inventory balance, we cannot confirm the COGS for the period. Remember BASE, Beginning, Additions, Subtractions, Ending; we are missing the critical beginning figure to confirm subtractions (COGS). With that said, we cannot confirm the income statement, since COGS is a related account. Net income then flows into both the Cash Flow and Retained Earnings statements and thus we cannot confirm these either. However, we can count inventory at the end of the period and thus confirm the balance on the date of the Balance Sheet. It might help to remember that the Balance Sheet is a single point in time, as where the other statements cover a period of time; thus if we are missing beginning data we cannot confirm this “period of time”.

Hope this helps.

[longway010]

Hi there,

Here is my understanding,

B/S is a report at one specific time point, therefore if auditor has not checked the accounts, he could not give any opinion. But as long as he observes the ending year inventory count, it is OK to express opinion because evidences have been collected.

I/S and other statements are different stories. They are summaries of activities by opening balance from ending balance, therefore if the opening balance could not be relied upon, so does the summaries themselves. In these cases auditors have to disclaim their opinions.

L.B.

[Anonymous]

If you can't audit the beginning balance of inventory you do not have enough information to give an opinion on the beginning balance sheet (didn't observe/test/etc). This carries forward to CoGS (due to needing the beginning inventory number to calculate it). If you don't have enough information on CoGS that means a big component of income is unknown/unproven, hence no reporting on the Income Statement (which then carries forward to R/E & Cash Flow).

Since ending inventory was observed/tested you can issue an opinion on the year end balance sheet.

[Author]

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