18-22For each ofthe following independent situations indicate the type offinancial

18-4, 18-8

a statement audit report that you would issue and briefly explain your reasoning. Assume that each item is atleast material.

a.BarefieldCorporation,awholly-ownedsubsidiaryofSandy,Inc.,isauditedby another CPA firm. As the auditor of Sandy, Inc., you have assured yourself of the other CPA firm's independence and professional reputation. However, you are unwilling to take complete responsibility for its audit work.

b.ThemanagementofBonnerCorporationhasdecidedtoexcludethestatementof cash flows from its financial statements because it believes that its bankers do not find the statement to be very useful.

c.YouareauditingDiverseCarbon,amanufacturerofnervegasforthemilitary,for the year ended September 30. On September 1, one of its manufacturing plants caught fire, releasing nerve gas into the surrounding area. Two thousand people were killed and numerous others were paralyzed. The company's legal counsel indicates that the company is liable and that the amount of the liability can be reasonably estimated, but the company refuses to disclose this information in the financial statements.

d.DuringyourauditofCucciaCoalCompany,thecontroller,TracyTricks,refuses to allow you to confirm accounts receivable because she isconcerned about complaints from her customers. You are unable to satisfy yourself about accounts receivable by other audit procedures and you are concerned about Tracy's true motives.

e.OnJanuary31,AsareToyManufacturinghiredyourfirmtoaudittheCompany's financial statements for the prior year. You were unable to observe the client'sinventory onDecember 31. However, you were able to satisfy yourself aboutthe inventory balanceusing other auditing procedures.

f.GelatoBros.,Inc.,leasesitsmanufacturingfacilityfromapartnershipcontrolled by the chief executive officer and major shareholder ofGelato. Your review of the lease indicates that the rentalterms are more than rental terms for similar buildings in thearea. The company refuses to disclose thisrelated-party transaction in thefootnotes.

g.JohnstoneManufacturingCompanyhasusedthedouble-decliningbalancemethod to depreciate its machinery. During the currentyear, management switched to the straight-line method because it felt that itbetter represented the utilization of the assets. You concur with its decision. All information is adequately disclosed in the financial statements