Management of a nonissuer believes and the auditor is satisfied that a material loss probably will occur when pending litigation is resolved. Management is unable to make a reasonable estimate of the amount or range or the potential loss, but fully discloses the situation in the notes to the financial statements. If management does not make an accrual in the financial statements, the auditor should express a(n):

1.		Qualified opinion due to a scope limitation
2.		Qualified opinion due to material misstatement of the financial statements
3.		Unmodified opinion
4.		Disclaimer due to scope limitation
5.		Unmodified opinion due to a scope limitation

Johnstone Manufacturing Company has used the double-declining balance method to depreciate its machinery. During the current year, management switched to straight-line b/c it felt that it better represented the utilization of the assets. You concur with its decision. All information is adequately disclosed in the financial statements. Assume that all companies mentioned are private companies and that each item is at least material.

1.		unqualified
2.		unmodified
3.		unqualified/unmodified with explanatory paragraph
4.		qualified
5.		disclaimer

Please solve it with explanation :)