1726. For each of the following brief scenarios, assume that you are reporting on a clients fi nancial statements. Reply as to the type(s) of opinion possible for the scenario. In addition: Unless stated otherwise, assume the matter involved is material. If the problem does not state that a misstatement (or possible misstatement) is pervasive, assume that it may or may not be pervasive (thus, the appropriate reply may include two possible reports). Do not read more into the circumstance than what is presented. Do not consider an auditor discretionary circumstance for modifi cation of the audit report unless the situation explicitly suggests that the auditors wish to emphasize a particular matter. Report Types may be used once, more than once, or not at all.

a. Bowles Company is engaged in a hazardous trade and has obtained insurance coverage related to	1. Unmodifi ed
the hazard. Although the likelihood is remote, a material portion of the companys assets could be	standard
destroyed by a serious accident.	report
b. Draves Company owns substantial properties that have appreciated signifi cantly in value since	2. Unmodifi ed
the date of purchase. The properties were appraised and are reported in the balance sheet at the	with an
appraised values (which materially exceed costs) with related disclosures. The CPAs believe that the	emphasisof-
appraised values reported in the balance sheet reasonably estimate the assets current values.	matter
c. During the audit of Eagle Company, the CPA fi rm has encountered a signifi cant scope limitation	paragraph
relating to inventory record availability and is unable to obtain suffi cient appropriate audit evidence	3. Qualifi ed
in that area.	4. Adverse
d. London Company has material investments in stocks of subsidiary companies. Stocks of the subsidiary	5. Disclaimer
companies are not actively traded in the market, and the CPA fi rms engagement does not	6. Either qualifi ed
extend to any subsidiary company. The CPA fi rm is able to determine that all investments are carried	or adverse
at original cost, but has no real idea of market value. Although the difference between cost and	7. Either
market could be material, it could not have a pervasive effect on the overall fi nancial statements.	qualifi ed or
e. Slade Company has material investments in stocks of subsidiary companies. Stocks of the subsidiary companies	disclaimer
are actively traded in the market. Management insists that all investments be carried at original	8. Either adverse
costs, and the CPA fi rm is satisfi ed that the original costs are accurate. The CPA fi rm believes that the	or disclaimer
client will never ultimately realize a substantial portion of the investments because the market value is
much lower than the cost; the client has fully disclosed the facts in notes to the fi nancial statements.