Skyway Hardware and Electronic Inc. (SHEI), a publicly listed entity, has a material unsecured loan receivable balance owing from Parts Supply Ltd. (PSL). SHEI has an October 31st year end. PSL declared bankruptcy on November 28, 2021. The auditors completed their field work for the audit of SHEI on December 12th and it is the auditors’ judgement that the loan receivable is impaired and should be written down. Management of SHEI disagree with this assessment and have refused to write-off the debt. SHEI is otherwise a profitable entity and the future outlook for the company is positive as it has recently secured 4 new customers.
Indicate the type of audit report to be issues. Include the type of opinion and any other modifications.
Justify your conclusion by describing the conditions and nature of the issue that is affecting the type of the audit report to be issued