3) (6 marks) The following are two unrelated situations. For each situation, outline possible deviations (if any) from an unmodified auditor's report that may be necessary and give reasons. State your assumptions.

A) Queen Lake Construction Ltd. uses an aggressive revenue recognition policy under the percentage of completion method for long-term construction contracts. Your review of this year's contracts indicates that several projects look as if they will be high in revenue for the first two years and then have negligible earnings for the next three years.