Auditors are us llc audited the financial statements of capital industries, a private company for the year ended december 31, 2019. materiality threshold was 750000. the following issues were encountered during the audit:

1. capital industries is a defendant in a lawsuit alleging environmental pollution. this is adequately disclosed in the Notes to the Financial Statements but no provisions for liability was recorded by management. The auditors proposed adjusting journal entry for 2000000 was rejected by management.

2. Management erroneously understated the income tax expense by 1200000. the auditors' proposed adjusting journal entry was accepted. this was a matter that involved especially challenging, subjective and complex judgement by the auditors,

3. Management revealed to the auditors that it was discontinuing a division - xyz products - a 100% wholly owned subsidiary in 2021. This division accounted for 30% of capital industries' revenues in 2019

Capital Industries' net income is 10000000 in 2019. it had outstanding weighted average common stock shares of 400000 and fully diluted shared of 6000000 during 2019.

QUESTION:

Write a memorandum describing how each of the above issue should be addressed in the Independent Auditors' Repot which is to be issues on March 10,2021

PLEASE WRITE SEPERATE PARAGRAPHS FOR EACH QUESTION AND ANSWER ALL THREE QUESTIONS. BLESS IT PLEASE <3