Requirement: Listed below are situations affecting an auditors' report. For each situation, indicate by letter, the type of report on the entity's financial statements the auditor should issue. 1. Restrictions imposed by a company prohibited the observation of physical inventories, which accounted for 35% of all assets and 45% of gross profit. Alternative audit procedures were not feasible, although the auditor was able to examine satisfactory evidence for all other items in the financial statements.

2. The entity has a lawsuit pending against them. There is significant uncertainty about the outcome of the lawsuit, which could have a significant impact on the viability of the entity. Management has provided adequate disclosure of the lawsuit in the footnotes accompanying the financial statements.

3. The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), no material misstatements were found by the auditor.

4. The client changed its method of accounting for depreciation. The auditor does not agree with the change. The effect of the change is material but not pervasive in the financial statements.

5. The entity has a lawsuit pending against them. It is probable that the entity will lose the suit. Management has not accrued the best estimate of the loss, but has provided information in the footnotes. It is not expected that this lawsuit will have a significant effect on the entity's ability to continue as a going concern.

6. Based on recent analysis of usage, the entity has changed the useful life of its office equipment from five to four years. This change is reflected in the depreciation amounts computed for the current year.

7. The auditors conclude that an entity's illegal act, which has a material and pervasive effect on the financial statements, was not properly accounted for or disclosed.

8. Subsequent to accepting the audit of Hunter Corp., the auditors determined they are not independent because of a financial interest in Hunter held by a newly-admitted partner.

9. During your audit of Jensen Inc., you discovered Jensen does not follow GAAP in reporting investments. The departure is immaterial to the financial statements as a whole.

10. Your client acquired two large subsidiaries and accounted for them properly in the financial statements and disclosures. These acquisitions are the clients first ever so you want to inform the readers about these acquisitions.

A. Unmodified opinion

B. Unmodified opinion with an explanatory paragraph

C. Qualified opinion

D. Disclaimer of opinion

E. Adverse opinion