(1) The business you are auditing has made a large investment into a new segment. They purchased a large amount of PPE and recently finished a new manufacturing plant producing highly specialized parts for the major airlines. Due to recent COVIDԵ 19 flight restrictions, the customers have cancelled their orders for these parts. While other segments are doing quite well, directors believe there will be little production in the new segment for this year, they are confident that the production will restart somewhere in July 2021. This is confirmed by a report on sales and cash-flow forecasts from independent experts. You are satisfied that the expert report was done fairly. In light of this, the most appropriate audit report you should issue is:

1. Unqualified opinion
2. Qualified opinion
3. Adverse opinion
4. Disclaimer of opinion

Question: B is the solution, but I wonder why? It is said by our teacher that because of the impairment of the investment properties, and the company did not disclose, so it's a qualified opinion.---How do we know, from the fact of this question, that the company did not disclose it correctly? Is there any indicator of that?

(2) As a result of the downturn in business arising from COVID-19, your client made a number of its employees redundant. One of the employees believes that their termination on 13 November 2021 was unlawful, as it was not related to the business downturn. They believe it constitutes wrongful dismissal, and immediately lodge a claim against your client. Your client's financial report for the year ended 31 October 2021 includes a subsequent events note relating to this matter as the claim is for a substantial amount of damages. In light of this, the most appropriate audit report you should issue is:

1. Qualified opinion.
2. Unqualified opinion.
3. Unqualified opinion with Emphasis of matter paragraph.
4. Adverse opinion.

Question: Here it says that there could be a substantial number of damages to the company so why don't we add an emphasis matter paragraph?