Consider each of the following independent and material situations. The financial year for each company is 30 June, 2014.

A. Medical Bio-Tech Ltd is a company that is involved in the research and development of new prescription drugs. The company is close to finalising testing on a new drug that will assist in the regeneration of cells in the heart after heart surgery. Once approval is obtained, this will be the first drug of its kind available in Australia, and a distribution contract has already been signed with an American pharmaceutical company. While testing of the drug has shown no immediate side effects, some patients that were treated early in the testing are now complaining of some chest pain. While this has only been the case in 10% of cases so far, some of the scientists in the company want the testing timeline to be extended so that this issue can be investigated more fully. In last years financial report (30 June 2013), significant emphasis was placed on the increased sales revenues that would occur due to the availability of the drug in late 2014 and early 2015. Sales projections were included in the 2013 annual report based on the information at the time. If the testing timeline is extended as now expected, the projections for sales in the 2015 financial year will be significantly impacted. The directors are concerned that this will affect the share price and future distribution contracts, and as such do not wish to disclose this information in the financial report.

B. Travel-Is-Us Ltd is a company that sells overseas leisure tours in both the wholesale and retail markets. The company has been operating for over 10 years and has developed a reputation for quality tours and expert advice. In the second half of the year, a bus company that has been used to provide travel in Europe went into liquidation and Travel-Is-Us was left unable to run 20 tours that had been fully booked by customers. Many of the customers were not able to claim this loss on their travel insurance and so are suing the company for the amounts paid for the tours that did not occur and additional costs that they paid due to the cancellation. The companys lawyers at this stage cannot estimate the amount being claimed in the legal action. In investigating the situation the auditor has come to the conclusion that there is a substantial likelihood of significant damages being awarded; however, the lawsuit is adequately disclosed in the financial statements.

C. Construct Ltd is a construction company that has been audited by the same audit firm for four years. The main income source of the company is acting as a sub-contractor to a large building company (Growcarn Ltd) that builds high-rise apartments. In the audit of Construct Ltd, the auditor is particularly concerned about the heavy reliance of Construct on their revenue from Growcarn Ltd. Should Growcarn cease using Construct as a sub-contractor; it is likely Construct would be placed into administration. Growcarn Ltd recently suffered a fire at its head office which involved electrical wiring that lead to damage of all electronic and paper accounting records of the company. Given the importance of Growcarn to Construct, previous audits have focused significant time on the transactions between the two companies and the value of the large proportion of Accounts Receivable that Growcarn makes up.

Required: For each of the three situations above: a) Identify the appropriate audit opinion to be issued by the audit partner. b) Explain the reasons why the particular audit opinion should be issued.