Question

A client decides not to make proposed adjustments that collectively are not material and wants auditor to issue report based on unadjusted numbers. Which of the following is true regarding financial presentationA. the f/s are free from material misstatement and no disclosure is required in the financial notesB. the f/s do not conform w GAAPC. the f/s are free from material misstatements, but disclosure of proposed adjustments are required in notes to financial statements

Answer 1

Option A. The f/s are free from material misstatement and no disclosure is required in the financial notes

Step-by-step explanation:

The reason is that if the management refuses to adjust the financial statement according to the external auditor's proposed adjustments and these proposed adjustments are immaterial.

Then the auditor is required to publish an unqualified opinion as the financial statements are free from material misstatements.

Beside all these, the proposed adjustments must be delivered to the management under the name "Management Representation Letter" with the acknowledgement of the management which says that the proposed adjustments were individually and collectively immaterial. Furthermore, under International Standard on Auditing, the auditor is not required to address the issue under any notes to financial statement.