Blinkhorn is currently being audited and the auditor has discovered that the payroll function is outsourced to a third party contractor called Wages R Us The auditor has contacted Wages R Us but they state that are unable to provide them with the payroll records of Blinkhorn as a recent fire has caused a catastrophic loss of data. The wages figure is material to the calculation of the profit or loss for the year. ?
What action should the auditor take?
A) The auditor should issue an unmodified audit report with an Emphasis of Matter Paragraph.
B) The auditor should issue a modified audit report with an adverse audit opinion
C) The auditor should issue a modified audit report with an 'except for' paragraph.
D) The auditor should immediately resign and inform the shareholders.

Question

Blinkhorn is currently being audited and the auditor has discovered that the payroll function is outsourced to a third party contractor called Wages R Us The auditor has contacted Wages R Us but they state that are unable to provide them with the payroll records of Blinkhorn as a recent fire has caused a catastrophic loss of data. The wages figure is material to the calculation of the profit or loss for the year. ?
 What action should the auditor take?
A) The auditor should issue an unmodified audit report with an Emphasis of Matter Paragraph.
B) The auditor should issue a modified audit report with an adverse audit opinion
C) The auditor should issue a modified audit report with an 'except for' paragraph.
D) The auditor should immediately resign and inform the shareholders.

Quizplus · Accepted Answer

The auditor should issue a modified audit report with an 'except for' paragraph due to the inability to obtain sufficient appropriate audit evidence regarding the payroll records, which is material but not pervasive.

Blinkhorn Is Currently Being Audited and the Auditor Has Discovered