Leer, CPA, has discussed various reporting considerations with two audit clients. The two clients asked how the following situations would affect the audit report.

a. A client has a loan agreement that restricts the amount of cash dividends that can be paid and requires the maintenance of a predetermined current ratio. The client complies with the terms of the agreement, and it is not likely that there will be a violation in the foreseeable future. The client believes there is no need to mention the restriction in the financial statements because it may mislead the readers.

b. During the year, a client correctly accounted for the acquisition of a majority-owned domestic subsidiary but did not properly present the minority interest in retained earnings or net income of the subsidiary in the consolidated financial statements.
The client agrees with Leer that the minority interest presented in the consolidated financial statements is materially misstated, but takes the position that the minority shareholders of the subsidiary should look to that subsidiary's financial statements for information concerning their interest.

Required: 

Each of these situations relates to one of the four generally accepted standards of reporting. Identify and describe the applicable reporting standard in each situation, and discuss how the situation relates to the standard and to Leer's report.
Organize your answer as follows:

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Situation Applicable Standard of Reporting Discussion of Relationship of Client Situation to Standard of Reporting and to Leer's Report 1. 2.