You have been asked to prepare unaudited financial statements for the Marek Company for the year ended December 31, 19X5. Marek does not want the notes to financial statements to disclose that the company is involved in litigation on a question of patent infringement. Potential damages that might have to be paid by the company exceed its net worth. Since you are not expressing an opinion on the financial statements, Marek does not believe you should be concerned with the adequacy of disclosure. 

1. How would you respond to Marek? 

2. Write the CPA's report on the financial statements that you would issue if the matter is not disclosed.