The Draft Financial Statements of BronteCo Currently Show a Profit

Multiple Choice

The draft financial statements of BronteCo currently show a profit before tax of $4.8m and revenue of $18m for the financial year ended 31 March 2019. ?
You have been informed that the finance director left BronteCo on 31 May 2018. As part of the subsequent events audit procedures, you reviewed post year-end board meeting minutes and discovered that a legal case for unfair dismissal has been brought against BronteCo by the finance director.
?
BronteCo's lawyers believe that the finance director's claim is likely to be successful, but estimate that $150,000 is the maximum amount of compensation which would be paid.
?
Management does not intend to make any adjustments or disclosures in the financial statements. Which of the following audit opinions will be issued if the unfair dismissal case is not adjusted for or disclosed within the financial statements?

A) A qualified audit opinion as the financial statements are materially misstated
B) A qualified audit opinion as the auditor is unable to obtain sufficient appropriate evidence
C) An unmodified opinion with an emphasis of matter paragraph
D) An unmodified audit opinion