Q5-Part B (10 marks) Latter, Ltd., a CPA firm in Phoenix, has completed the audit of the financial statements of Sunny Corporation as of, and for, the year ended December 31, 20X1. Findings related to the financial statements and the audit include: Although Sunny has been in existence for a number of years and been audited for the past seven years by Latter, it is presenting only current-year financial statements. Latter was unable to perform normal accounts receivable confirmation procedures, but alternate procedures were used to satisfy Latter as to the validity of the receivables. Sunny Corporation is the defendant in litigation, the outcome of which is highly uncertain. If the case is settled in favor of the plaintiff, Sunny will be required to pay a substantial amount of cash that might require the sale of certain assets. The litigation and the possible effects have been properly disclosed in Note 11. Latter wishes to include discussion of this matter in the audit report. During 20X1 Sunny changed its method of accounting for long-term construction contracts and properly reflected 9 the effect of the change. Latter is satisfied with Sunnys justification for making the change. The change is discussed in Note 12. Sunny issued debentures on January 31, 20X1, in the amount of $10 million. The funds obtained from the issuance were used to finance the expansion of plant facilities. The debenture agreement restricts the payment of future cash dividends to earnings after December 31, 20X1. Sunny declined to disclose these data in the notes to the financial statements. Latte reconsiders this a material but not pervasive omission. Latter gathered sufficient appropriate audit evidence as of February 10, 20X2, and planned a report release date of February 16, 20X2. Required: Consider all facts given and decide what type of auditor report is appropriate and the justification (2 marks); and prepare the auditors report in an acceptable and complete format, incorporating any necessary departures from the standard report. (8 marks)