Adjustments In your audit of Lomar Company for the calendar year 2014, you find a number of items that you believe represent possible adjustments to the company's books. Management does not want to make any adjustments. REQUIRED: Assuming that Lomar is a public company describe how the adjustments might impact your audit report on internal control over financial reporting

Answer 1

Auditors of public companies must evaluate the noted adjustments to determine their impact on the auditor's report on internal control over financial reporting. The audit of the financial statements and the audit of internal control over financial reporting for a public company are to be integrated. Public company auditors must consider the results of audit procedures performed to issue the audit report on the financial statements when issuing the audit report on internal control. For example, if the possible adjustments identified for Lomar Company are deemed to be material misstatements that were not initially identified by the company's internal controls, the auditor should consider this as at least a significant deficiency, if not a material weakness for purposes of reporting on internal control. In this case, the auditor's report on Lomar's financial statements would be unqualified as long as management corrected the misstatement before issuing the financial statements. However, the auditor's report on internal control over financial reporting would include an adverse opinion if the auditor concludes that the company has one or more material weaknesses.