Western Trading Company

Western Trading Company is a grain brokerage business. The company is a sole proprietorship. For purposes of grains inventory valuation at year-end, the company follows a practice of marking-down inventory values where market prices on commodities exchanges are lower than the actual costs of the company's grains in inventory. Relevant market prices are as of 31 December. The company had adjusted inventory values as of 31 December, prior to the performance of an outside audit.

As a part of their field work, outside auditors determined that market values for the company's grains inventory had declined further by 15 February, the last day of the field audit. The auditors proposed a further write-down of the company's grains inventory, to account for the further drop in market values between 31 December and 15 February.

The company refused to accept the proposed additional write-down of the grains inventories, contending that the further market decline was temporary. As a consequence, the auditors issued a qualified opinion, stating that the company had deviated from generally accepted accounting procedures (GAAP) in the valuation of its grains inventory.

The auditor's justification for the issuance of a qualified opinion is assessed in this research. Additionally, the rationale for an alternative opinion·(1) unqualified, justified departure from GAAP, (2) adverse opinion, or (3) disc

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nd FAC No. 2, the outside auditor clearly was correct in seeking correct the latest and best information with which to consider the valuation of the company's grains inventory. The appropriateness of the application and interpretation of these data, however, are still to be assessed. Accuracy of Statement of financial Position Accounting Practice Bulletin (APB) Opinion No. 9 issued by the FASB states that the purpose of the income statement and the statement of retained earnings in the stockholders' equity section of the balance sheet (both separately and combined) is to reflect in a broad sense the results of the operations of an enterprise. When both financial position and results of operations are presented, disclosure of changes in the separate accounts comprising stockholders' during the most recent annual fiscal period and any subsequent interim period presented is required to make financial statements sufficiently informative. Disclosure of Contingencies With respect to retained earnings, disclosure must be made in financial statements of any contingency applicable to retained earnings. Statement of Financial Accounting Standards (SFAS) No. 5 issued by the FASB defines a contingency as an existing condition, sit
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Approximate Word count = 1775
Approximate Pages = 7 (250 words per page)

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