r each of the following independent situations, indicate the type of audit report that you would issue and briefly explain your reasoning. Assume that all companies mentioned are private companies and that each item is at least material.

Situation 1:

The management of ABC Corporation has decided to exclude the statement of changes in owners' equity from its financial statements because it believes that its bankers do not find the statement to be very useful.

Situation 2:

BETA. Inc. leases its manufacturing facility from a partnership controlled by the chief financial officer and a family member of major shareholder of BETA. Inc. Your review of the lease indicates that the rental terms are in excess of rental terms for similar buildings in the area. The company refuses to disclose this related-party transaction in the footnotes.