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:

Normally Distributed Curves

Graphical representations of a normal distribution, showing how data points are symmetrically distributed around the mean.

Mean

A statistical measure representing the average value in a set of numbers, calculated by dividing the sum of all values by the number of values.

Median

The middle value in a list of numbers, which divides the dataset into two halves.

Mode

The value that occurs most frequently in a given set of data.