You are the auditor of Glaxoa Corporation (Glaxoa) for the current year. For each situation: Describ

You are the
auditor of Glaxoa Corporation (Glaxoa) for the current year. For each situation:

Describe the corrections, if any, you
would propose to management to make the financial statements conform to GAAP..25in;’=”” list=”” lfo1;=”” level1=”” l0=”” 0pt;=””>Identify the type of opinion you would
issue if management refused to make your proposed changes along with any
effects on your audit report..25in;’=”” list=”” lfo1;=”” level1=”” l0=”” 0pt;=””>Provide a brief (one to three
sentences) reason for your decision.EXAMPLEYou found that
Glaxoa incorrectly included the value of a large accounts receivable account
twice in its financial statements by incorrectly recording the related sale
twice. The amount of the account was
material. You found no other material misstatements or encountered any
significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:AJE to reduce Accounts Receivable and Sales for the
unsupported amount Type of Opinion
if Management Refuses to Make Proposed Corrections:Modified Opinion – Qualified with basis for modification paragraphReason(s):The misstatement was material but was not pervasive. The financial statements, while materially
misstated, were not so misleading as to not present fairly in conformity with
GAAP.Situation 1You
completed your audit of Glaxoa and found no material misstatements. You
encountered no significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections: Reason(s):Situation 2You found that
Glaxoa had changed its accounting principles relating to its cost flow method
for inventory from LIFO to FIFO this year.
Glaxoa did not disclose the change in the notes to the financial
statements. You determined the impact of
the change in accounting principles was material with respect to the financial
statements. Upon further inquiry and testing, you determined the change was justified
and that both methods are consistent with GAAP. You found no material
misstatements or encountered any significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections: Reason(s):Situation 3You were unable
to obtain sufficient, appropriate evidence about the value of Glaxoa’s
investment in a foreign business because audited financial statements for that
business were not available. The
investment amount was material to Glaxoa’s financial statements. You found no material misstatements or
encountered any significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections:Reason(s):Situation 4You found that Glaxoa
had a material notes receivable due from Glaxoa’s Chief Executive Officer that
was properly disclosed in the financial statement footnotes in accordance with
GAAP. You decide additional disclosure
should be made because of the significance of the asset. You found no material misstatements or
encountered any significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections: Reason(s):Situation 5You found that
Glaxoa used an accounting principle for its cost flow method related to
inventory that was not consistent with GAAP.
Glaxoa disclosed the accounting principle in the notes to the financial
statements. You determined the impact on
the financial statements was material.
Upon further inquiry and testing, you determined the departure from GAAP
was justified because following GAAP in Glaxoa’s unique situation would have
resulted in misleading financial statements. You found no material
misstatements or encountered any significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections: Reason(s):Situation 6You found that
Glaxoa failed to properly expense general repairs and maintenance costs related
to its plant and equipment assets.
Glaxoa improperly capitalized those costs causing both assets and net
income for the year to be overstated by a material amount. You also found an unrecorded liability
resulting from civil litigation.
Glaxoa’s legal counsel had concluded that the potential loss was both
probable as of the balance sheet date and the amount of the loss could be
reasonably estimated. The amount of the estimated loss was material to the
financial statements. The total effect on the financial statements of the
misstatements and non-disclosures was both material and pervasive. You found no
other material misstatements or encountered any significant problems in
conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections:Reason(s):Situation 7You found that Glaxoa
had a material notes receivable due from Glaxoa’s Chief Executive Officer that
was only disclosed as a Notes Receivable on the balance sheet. You also found a
material unrecorded liability resulting from civil litigation. Glaxoa’s legal counsel had concluded that the
potential loss was both reasonably possible as of the balance sheet date and
the amount of the loss could be reasonably estimated. The total effect on the
financial statements of the non-disclosures was both material and pervasive.
You found no other material misstatements or encountered any significant
problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections:Reason(s):Situation 8You found that
Glaxoa failed to properly expense general repairs and maintenance costs related
to its plant and equipment assets.
Glaxoa improperly capitalized those costs causing both assets and net
income for the year to be overstated by a material amount. You also found an unrecorded liability
resulting from civil litigation.
Glaxoa’s legal counsel had concluded that the potential loss was both
reasonably possible as of the balance sheet date and the amount of the loss
could be reasonably estimated. The amount of the estimated loss was material to
the financial statements. The total effect on the financial statements of the
misstatements and non-disclosures was material. You found no other material
misstatements or encountered any significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections:Reason(s):Situation 9Glaxoa’s
management refused to allow you observe the taking of physical inventory at two
of its main warehouse citing concerns that company trade secrets might be
revealed. The value of inventory held at
those two locations was material to the financial statements. You found no material misstatements or
encountered any other significant problems in conducting the audit.Proposed
Corrections to the Financial Statements:Type of Opinion
if Management Refuses to Make Proposed Corrections:

Reason(s):

Situation 10
You found that
Glaxoa failed to properly expense general repairs and maintenance costs related
to its plant and equipment assets.
Glaxoa improperly capitalized those costs causing both assets and net
income for the year to be overstated by a material amount. You found no other material misstatements or
encountered any significant problems in conducting the audit.

Proposed
Corrections to the Financial Statements:

Type of Opinion
if Management Refuses to Make Proposed Corrections:

Reason(s):

Situation 11
You found that
Glaxoa had changed its accounting principles relating to its cost flow method
for inventory from LIFO to a method based on current fair market value (FMV)
this year. You determined the impact of
the change in accounting methods was a material increase in the value of
inventory reported on the financial statements. Upon further inquiry and
research, you determined that Glaxoa’s use of FMV was not consistent with
GAAP. You found no other material
misstatements or encountered any significant problems in conducting the audit.

Proposed
Corrections to the Financial Statements:

Type of Opinion
if Management Refuses to Make Proposed Corrections:

Reason(s):