Final answer:
In a first-year audit, auditors who doubt the validity of the beginning inventory will likely have issues with issuing unqualified opinions on the balance sheet and income statement, as these statements are directly affected by inventory figures. The statement of cash flows is generally not impacted in the same way.
The correct option is c. statement of cash flows
Step-by-step explanation:
In a first-year audit, if the auditors have doubts about the validity of the beginning inventory, they may not be able to issue an unqualified opinion on the following statements: a. balance sheet and b. income statement. The balance sheet is directly affected by the beginning inventory figures as it reflects the assets as of the end of the period. If the inventory is overstated or understated, it impacts the accounting equation and the reported asset values. The income statement is influenced because the beginning inventory is used to calculate the cost of goods sold, which in turn affects the gross profit and net income.
An inaccurate beginning inventory could result in misstated earnings. However, the c. statement of cash flows is not typically directly affected by inventory values, as it reflects cash inflows and outflows, rather than accrued revenues and expenses.