Question

You are the lead auditor on a financial statement audit. The client's management refused to permit your audit team to physically examine inventory. Why does your audit firm need to depart from the unqualified audit report?

Answer 1

Answer:

The scope of the audit has been restricted

Explanation:

An audit scope refers to the amount of time and documents which are involved in an audit. This audit scope determines how deep the audit will be made since it can go from a few documents to the total documents of the company.

When there is an scope limitation, the auditor's report will not have sufficient information to give evidence about the financial state of the company.

Therefore, if the client's management refuses to permit the audit team to physically examine inventory, the firm needs to depart because the scope of the audit has been restricted.