Part IV. Audit Opinions 15 points (3 points each) For each type of the following brief scenarios, assume that you are reporting on a client's financial statements. Reply as to the types of opinion possible for the scenario and provide a brief explanation. 1. A client changed its depreciation method for production equipment from the straight-line method to the units-of-production method based on hours of utilization. The auditor concurs with the change. 2. An auditor discovered that a client made illegal loan to one company executive. The auditor was unable to determine the amounts associated with the loan because of the client's inadequate record-retention policies. Although there is no likelihood that the financial statements are pervasively misstated, they may be materially misstated. The client refuses to disclose the loans in a note to the financial statements. 3. Due to recurring operating losses and working capital deficiencies, an auditor has substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time. The notes to the financial statements do not adequately disclose the substantial doubt situation, and the auditor believes the omission fundamentally affects the uses understanding of the financial statements. 4. A client is issuing two years of comparative financial statements. The first year was audited by another auditor who is being asked and agreed to reissue her audit report. (Reply as to the successor auditors' report) 5. An auditor reporting on group financial statements decided not to take responsibility for the work of a component auditor who audited a 70% owned subsidiary and issued an unqualified opinion. The total assets and revenues of the subsidiary are 5% and 8%, respectively, of the total assets and revenues of the entity being audited