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For each of the following independent situations, assume that any amounts would be material.

$($I$)$ Indicate the TYPE of appropriate audit report; A$.$ unqualified, B$.$ qualified or adverse, C$.$ qualified

or disclaimer, D$.$ Disclaimer, E$.$ Qualified only, or F$.$ Other. INDICATE the situation involved, i$.$e$.$Accounting situation$,$ and DISCUSS the situation.

$($II$)$ State whether an explanatory paragraph $[$i$.$e$.$ PCAOB audit$]$ would be included, and if so$,$ what would be included in the explanatory paragraph.

For an UNQUALIFIED auditor$$s report, if the wording is changed, indicate how it would be changed $[$Relates to Shared Report$].$ The auditor agrees to any accounting change, if the change is proper GAAP.

$1.$ In auditing the long$-$term investments account $($company uses the equity method for this investment$),$ an auditor is unable to obtain audited financial statements for an investee located in a foreign country.

$2.$ The company refuses to include a Statement of Cash Flows with the financial statements. Management feels that the Income Statement should be the users$$ focus.

$3.$ A member of the staff from the CPA firm doing the audit of ABC Company has a financial interest in ABC Company.

$4.$The auditor, having obtained sufficient appropriate audit evidence, and having concluded that misstatements, individually or in the aggregate, are material but not pervasive to the financial statements$,$ would issue what opinion. See CPA Exam materials.

$5.$ The company uses Historic Cost, rather than Lower of Cost or Net Realizable Value to value inventory. It is felt that this is more relevant information.

$6.$ The company changes from First$-$in$,$ First $$out $($FIFO$)$ to Last$-$in$,$ Current$-$knowledge $($LICK$)$ for inventory valuation.

$7.$ The CPA firm was not able to observe or take part in the taking of the company$$s physical inventory. The company uses the periodic inventory system to value inventory; perpetual inventory records are not available.

$8.$ The status of the client as a going concern is extremely doubtful. The matter is disclosed in the footnotes.

$9.$ The company uses an appraiser$$s estimate of current Replacement Cost to report the value of previously acquired land owned by the company. It is felt this is more recent information

$10.$ The controller requested that the auditor not send accounts receivable confirmations to its largest customers. The auditors were able to use alternative procedures to ascertain the existence of

the receivables.

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