The following independent situations for which you will recommend an appropriate audit report

1. Subsequent to the date of the financial statemnets as part of his post-balance sheet date audit procedures, a CPA learned that a recent fire cause heavy damage to one of the client's two plants; the loss will not be reimbursed by insurance. The newspapers descried the event in detail. The finanicla statemtns and footnotes as prepared by the client did not disclose the loss caused by the fire.

2. During the course of his audit of the financial statements of a corporation for the purpose of expressing an opinion on the statements, a CPA is refused permission to inspect the minutes of board of director meetings that document significant decisions of the board. The corporation secretary instead offers to give the CPA a certifiied copy of all reolutions and actions involving accounting matters.

3. A CPA is engaged in the audit of the financial statements of a large manufacturing company with branch offices in many wideley separated cities. The CPA was not ale to count substantial undeposited cash receipts at the close of business on the last day of the fiscal year at all branch offices.

As an alternative to this aduiting procedure used to verify the accurate cutoff of cahs receipts, the CPA observede that deposits in transit as shown on the year-end day bank reconciliation appeared as credits on the bank statemtn on the first business day of the new year. He was satisfied as to the cutoff of cash receipts by the use of the alternative procedure.

4. On January 2, 2017, the Retail Auto Parts Company received a notice from its primary supplier that effective immediately, all wholesale prices will be increased 10%. On the basis of the notice, Retail Auto Part revalued its December 31, 2016, inventory to reflect the higher costs.The inventory constituted a material proportional of total asssets; however, the effect of the revaluation was material to current assets but not to toal assets or net income. The increase in valuation is adequately disclosed in the footnotes.

5. A CPA has completed her audit of the financial statemetns of a bus company for the year ended December 31, 2016. Prior to 2016, the company depreciated its buses over a 10-year period. During 2016, the company determiend that a more realistic estimated life for its buses was 12 years and coumputed the 2016 on the basis of the revised estimate. The CPA has satisfied herself that the 12-year life is reasonable.

The company has adequately disclosed the change in estimated useful lives of its buses and the effect of the change on 2016 income in a note to the financial statements.

7. For the past 5 years, a CPA has audited the financial statements of a manufacturing company. During this period, the aduit scope was limited by the client as to the observation of the annual physical inventory. Because the CPA considered the inventories to be material and he was not able to satisfy himself by other auditing procedures, he was unable to express an unmodified opinion on the financial statements in each of the 5 years.

The CPA was allowed to observe physical inventories for the current year ended December 31, 2016, because the client's banker would no longer accept the audit reports. However, to minimize audit fees, the client requested that the CPA not extend his audit procedures to the invetory as of the beginnning of the year, January 1, 2016.

For each situation, do the following:

a. Indentify which of the conditions requiring a deviation from a standard unmodified opion audit report is applicatable, if any.

b. State the level of materiality as immaterial, material, or highly material. If you cannot decide the level of materiality, state the additional information needed to make a decision.

c. Given your answers in parts a and b, state the appropriate audit report from the following alternatives (if you have no decided on one level of materiality in part b, state the appropriate report for each alternative materiality level):

1. Unmodified opinion- standard wording 4. Qualified opinion- GAAP departure

2. Unmodified opinion- explanatory paragraph 5. Qualified opinion- scope limitation

3. Unmodified opinion- nonstandard report wording 6. Disclaimer

7. Adverse