(b) There are two common types of confirmations used for confirming accounts receivable: "positive" confirmation and "negative" confirmation. Distinguish between both types of confirmation and state the circumstances in which each should be used. Why do auditors often use a combination of positive and negative confirmations on the same audit? (10 marks) (Total 20 marks) Question 5 (a) For each of the following independent situations, indicate the reason for and the type of auditors' report that you would issue. Assume that each item is significant. (1) You have been appointed as an auditor for Marlene Bhd the holding company and its subsidiaries. One of the subsidiary's financial statements was qualified by their auditor (2 marks) Your client has incurred substantial losses in recent years and is unable to repay various bank loans which are falling due. The company's ability to continue as a going concern is in doubt. (2 marks) (iii) During your audit of Andrea Sdn. Bhd. the financial controller refuses to allow you to confirm accounts receivable because he is concemed about complaints from the customers. You are unable to satisfy yourself about accounts receivable by other audit procedures. (2 marks) (iv) You are auditing a pharmaceutical company and it was later found that the company is a defendant in a lawsuit involving a breach of contract. The legal counsel of the company indicates that the company is likely to be liable, but the company does not want to disclose this information in the financial statements. (2 marks) (V) Kenny Bhd. has used the reducing-balance method to depreciate its machinery. During the current year, the company switched to the straight-line method because they felt that it better represented the utilisation of the assets. You agree with their decision. All information is adequately disclosed in the financial statements. (2 marks)