The audit situations below present various independent factual situations an auditor might encounter in conducting an audit. For each situation, (1) select the opinion the auditor would issue and (2) the report modifications (if any) that would be necessary. Select, as the best answer for each item, the action the auditor normally would take. For each INDEPENDENT situation you should assume the following The audit is for a non-public company The auditor is independent The auditor previously expressed an unmodified opinion on the prior-year financial statements unless otherwise noted The conditions for an unmodified opinion exist unless contradicted in the factual scenario The conditions stated in the factual scenario are material The conditions stated in the factual scenario are not pervasive unless otherwise noted. . No report modifications are to be made except in response to the factual scenario Audit Situation 1. The auditor was not able to confirm accounts receivables at year-end but was able to become satisfied that the receivables were fairly stated by performing alternative procedures. 2. Due to recurring operating losses and working capital deficiencies the auditor has substantial doubt about an entity's ability to continue as a going concem for a reasonable period of time. However, the F/S disclosures are adequate. 3. The auditor could not observe a client's physical inventory count and was unable to become satisfied about the inventory balance using alternative procedures. Inventory represents 70% of total assets. Thus, the impact is considered pervasive. 4. XXL Industries changed its method of accounting for inventories from FIFO to LIFO and has disclosed the change in the footnotes to the financial statements. The change was accounted for properly. However, the auditors do not agree with the rationale for the change and believe that it was made to report a higher level of eamings. 5. The audit team has identified an immaterial departure from GAAP in their examination, but the entity has not adjusted its financial statements for this departure or disclosed this departure in its financial statement or related disclosures. 6. An entity is a defendant in a lawsuit alleging infringement of certain patent rights. However, management cannot reasonably estimate the ultimate outcome of the litigation. The auditor believes that there is a reasonable possibility of a significant material loss, but the lawsuit is adequately disclosed in the notes to the F/S. 7. An entity discloses certain lease obligations in the notes to the F/S. The auditor believes that the failure to capitalize these leases is a departure from GAAP. The departure is considered to have a pervasive impact on the financial statements For audit situation #1 please indicate the select the [Choose] opinion the auditor would issue. For audit situation #1 please indicate the report [Choose] modifications (if any) that would be necessary. For audit situation #2 please indicate the select the opinion the auditor would issue. [Choose ] For audit situation #2 please indicate the report (Choose] modifications (if any) that would be necessary. For audit situation #3 please indicate the select the opinion the auditor would issue. [Choose For audit situation #3 please indicate the report Choose modifications (if any) that would be necessary. For audit situation #4 please indicate the select the opinion the auditor would issue. [Choose) For audit situation #4 please indicate the report c WEBCAM RECORDING For audit situation #4 please indicate the report modifications (if any) that would be necessary For audit situation FS please indicate the select the opinion the auditor would hou For audit situation 85 please indicate the report modifications of any that would be necessary For audit situation #5 please indicate the select the opinion the auditor would i For audit situation #6 please indicate the report modifications if any) that would be necessary For audit situation #7 please indicate the select the coinion the auditor disse [Choose Choose Advene audit opinion Describe the circumstances in an explanatory paragraph preceding the opinion paragraph without modifying the four standard pr Qualibed audit opinion Modify the opinion, basis for opinion, and auditors responsibilities paragraphs Describe the circumstances in an explanatory paragraph following the Basis for Opinion paragraph without modifying the four standard paragraphs No modification necessary Unmodified audit opinion Modify the opinion and auditor's responsibilitiesparagach No modification is necessary Describe the circumstances in an explanatory paragraph the opinion paragraph Modify the opinion and basis for opinion paragraphs. Disclaimer of opinion Modify each of the four paragraphs Tenome Choose] For audit situation #7 please indicate the report [Choose modifications of any that would be necessary