The following seven situations are related to possible audit reports and some of the paragraphs that are written in these types of reports. Unless instructed otherwise, assume that the amounts involved are substantial (material) and that the clients are private corporations.

5. A company under audit changes from the FIFO inventory cost flow method (FIFO) to a different method that is not generally accepted (non-GAAP). Of course, the auditors do not agree with this change. The change severely affects all financial statements issued for that period.

6. The client retained many of the accounting records during the audit process so that, by not making them available to the auditors, they were unable to obtain sufficient and competent evidence to be able to reach conclusions about the reasonableness of the account Equipment, the which has a substantial balance.

7. Customer changed their doubtful accounts estimate from 2% to 3% of credit sales for the year. The auditors understand that the change is reasonable.

Use the table provided and the following legends to say the type of report that should be issued in each case, the type of paragraphs or explanatory language that should be used, as well as a brief explanation of why you think so.

Opinion types

A- Adverse N- Denial (disclaimer) C- Qualified U- Not modified

Type of paragraphs that are issued (use acronyms)

Types of modifications or explanations

ENF Add a paragraph to emphasize an issue (explanatory language).

BO Add the paragraph that explains the basis for the modification.

OTHER Make other explanatory languages that requires altering more than one paragraph.

NMC No modifications or changes to the explanatory language apply (for example, in the case of the standard normal report)