You are the auditor of X Company, and during your audit for the year ended September 30, 19X7, you note that approximately 76 percent of the company's sales were to one customer. In the prior year, no single customer accounted for more than 28 percent. You believe disclosure of this fact is significant because the loss of this customer could seriously affect future operations of X Company. Management of X Company refuses to include this information in the financial statements, maintaining that this type of information is not often found in financial statements and that it could have a negative effect on the negotiation of the renewal of a bank loan now in progress.

a. How would you reply to \(\mathrm{X}\) Company management with regard to this disclosure?

b. Assume that you are unable to persuade \(\mathrm{X}\) Company management to make the disclosure that you consider appropriate; draft the audit report that you would issue.