Consider each of the following material independent situations. In each case assume that the client is a reporting entity and that general purpose financial statements have been prepared for the year ended the 30th June 20X9. You (as the auditor) have conducted your audit testing and are ready to prepare the audit report. Also assume that in each case management will not take any further action should you request such. a) Green Ltd (Green) is a furniture wholesaler. The recent downturn in the economy has made trading very difficult for Green. Profit margins are very tight and suppliers are requesting cash payments when deliveries are made. However, Green is still able to operate. The directors have decided to insert a note in the financial statements that there are some going concern issues. You agree with the directors. Overall, you are satisfied with the preparation and presentation of the financial report. b) Tough Ltd (Tough) is a manufacturer of tools. With the exception of one item noted by your assistant, you are satisfied with the financial statements prepared by Tough. Your assistants note stated: The new financial controller has reconsidered the method used to review the useful lives of the plant and machinery, and has determined that the old policy is no longer appropriate. Consequently, he has implemented a new policy for the current financial year, which is adequately disclosed in the accounts. However I am not satisfied that the new policy is appropriate because it extends the useful lives of the assets, without apparent justification

Required: For each situation: (i) What is the critical circumstance described in the situation below. (ii) Can you provide an unmodified audit opinion? Give reasons for your answer. (iii) If not, what two possible opinions could you provide? (iv) If applicable, what is the level of materiality in this situation? (v) When you consider your answers to (ii), (iii) and (iv) above, what opinion should you provide? (vi) Is there an additional issue you would disclose in the audit report? If so, what is it and what is the title of the paragraph in which it is disclosed?