Question

Four weeks after the year-end date, a major-customer of Prince Construction Co. declared bankruptcy. Because the customer had confirmed the balance due to Prince at the balance sheet date, management refuses to charge off the account or otherwise disclose the information. The receivable represents 10% of accounts receivable and 20% of net earnings before taxes. First, Identify which of the conditions requiring a modification of or a deviation from an unqualified standard report is applicable: [ Select ] Second, suppose this is

Answer 1

Adverse or qualified report

Step-by-step explanation:

The adverse or qualified report in audit is the statement which confirms that there is some material misstatement in the financial statements and it impacts company's financial position. This opinion of auditors proves that financial statements of the company are not reliable. In the given scenario Prince Construction is declared bankrupt and this is serious concern for any organization. The audit report for such a company will be adverse or qualified.