Imaginary Services Co Pty Ltd Started Trading Last Year, and Has

question 15

Essay

Imaginary Services Co Pty Ltd started trading last year, and has undergone a recent surge of growth due to increased demand for their Imaginary Service.Your firm was appointed auditor for Imaginary Services Co Pty Ltd in August 2019.As a result of this timing, you did not get the opportunity to observe the physical inventory count as of 30 June 2019, as it was done prior to your appointment.Owing to the nature of the company's records, you have not been able to satisfy yourself as to inventory quantities.
The inventory balance is material, however, you have found that controls over inventory are good, and that there is a low risk of misstatement for this asset.What type of audit report would you issue, and why?
If the company was Imaginary Consumables Co Pty Ltd, and the controls over inventory were not so good, would this affect the audit report, and why?

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Definitions:

Self-Interest

The consideration of one's own personal benefit or advantage, especially when pursued without regard for others.

Poisson Probability Distribution

A statistical distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space, assuming these events occur with a known constant mean rate and independently of the time since the last event.

Continuous Probability Distribution

Describes the probability distribution of a continuous random variable, indicating the likelihood of the variable taking on a range of continuous values.

Poisson Distribution

A probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known constant mean rate and independently of the time since the last event.