In the spaces provided, reply to the five situations below that relate to the audit of financial statements of nonpublic companies. Unless indicated otherwise, assume that material amounts are involved. Reply as to the type of opinion that should be issued as follows:

Types of Opinion Adverse

Disclaimer

Qualified

Unqualified (unmodified).

SITUATIONS: ________1. A company has departed from GAAP. This departure is material and pervasive so that the financial statements do not fairly represent the financial position of the company.

________2. A company has excluded several liabilities from the Balance Sheet. Except for this, the auditor is satisfied that she has gathered sufficient appropriate evidence to render an opinion.

________3. A group auditor decides not to take responsibility for the work of the component auditor who audited a subsidiary and issued an unmodified opinion. The total assets and revenues of the subsidiary are 5% and 8%, respectively of the total assets and revenues of the entity being audited. The group auditor believes that he has gathered enough evidence in his portion of the audit.

________4. A company changes from FIFO to LIFO for inventory valuation and the auditor concurs (agrees) with the change. The change has a material effect on the comparability of the entity's financial statements this year, but is expected to have an immaterial effect in the future. The auditor wishes to emphasize the change in method.

________5. Inadequate record retention policies by the client have resulted in a situation in which a CPA is unable to obtain sufficient appropriate audit evidence with respect to a material account.