Audit Report Modifications Complete problem below.

Audit Report Modifications1. Audit Report ModificationsComplete problem below. List a represents the types of opinions the auditor ordinarily would issue and List Brepresents the report modifications [if any] that would be necessary. Select as the best answer for each situation[items 1 to 6] the type of opinion and modifications, if any, the auditor would normally select. The types of opinionsin List A and the report modifications in List B may be selected once, more than once, or not at all. The paper shouldbe 2-3 pages.Problem:Items 1 through 6 present various independent factual situations an auditor might encounter in conducting an audit.For each situation assume:Assume:• The auditor is independent.• The auditor previously expressed an unqualified opinion on the prior year’s financial statements.• Only single-year (not comparative) statements are presented for the current year.• The conditions for an unqualified opinion exist unless contradicted in the factual situations.• The conditions stated in the factual situations are material.• No report modifications are to be made except in response to the factual situation.Situations:1. In auditing the long-term investments account, an auditor is unable to obtain audited financial statements for aninvestee located in a foreign country. The auditor concludes that sufficient appropriate audit evidence regarding thisinvestment cannot be obtained.2. Due to recurring operating losses and working capital deficiencies, an auditor has substantial doubt about anentity’s ability to continue as a going concern for a reasonable period of time. However, the financial statementdisclosures concerning these matters are adequate.3. A principal auditor decides to take responsibility for the work of another CPA who audited a wholly ownedsubsidiary of the entity and issued an unqualified opinion. The total assets and revenues of the subsidiary represent17 percent and 18 percent, respectively, for the total assets and revenues of the entity being audited.4. An entity issues financial statements that present financial position and results of operations but omits the relatedstatement of cash flows. Management discloses in the notes to the financial statements that it does not believe thatstatement of cash flows to be a useful financial statement.5. An entity changes its depreciation method for production equipment from straight-line to a units-of-productionmethod based on hours of utilization. The auditor concurs with the change, although it has a material effect on thecomparability of the entity’s financial statements.6. An entity discloses certain lease obligations in the notes to the financial statements. The auditor believes that thefailure to capitalize these leases is a departure from generally accepted accounting principles.Required:List A represents the types of opinions the auditor ordinarily would issue and List B represents the reportmodifications (if any) that would be necessary. Select as the best answer for each situation (items 1 through 6) thetype of opinion and modifications, if any, the auditor would normally select. The types of opinions in List A and thereport modifications in List B may be selected once, more than once, or not at all.(AICPA, adapted)