1. 2. 3 3. 2 The company is in the airline leasing business. During the year, they changed the depreciation method for the planes, which had a material effect on depreciation expense. Intelligis Electronics is a manufacturer of advanced electrical components. During the year, changes in the market resulted in a significant decrease in the demand for their products, which are now being sold significantly below cost. Management refuses to write-off the products or to increase the reserve for obsolescence. During the year, your client changed the useful lives of significant manufacturing fixed assets. This change has a material effect on the current year's financial statements. You do not agree with the change. The client has a significant investment in a foreign subsidiary. You are unable to verify the assets at the subsidiary. Because of declining profitability and a negative working capital balance, the auditor has doubt about whether the company will continue in existence. Management's plan to raise additional capital do not mitigate those concerns. 4. 5 5.