You are auditing the financial statements for your new client, Paper Packaging Corporation, a manufacturer of paper containers, for the year ended March 31, 2016. Paper Packaging's previous auditors had issued a going concern opinion on the March 31, 2015, financial statements for the folowing reasons Paper Packaqing had defaulted on $10 million ot unregistered debentures sold to three insurance companies, which were due in 2015, and the default constauted a possible violation o other debt agreements The interest and principal payments due on the remainder of a 10-year credit agreement, whict began in 2011, would exceed the cash flows generated from operations in recent years. The company had disposed of certain operating units The proceeds from the sale were subject to possible adjustment through arbitration proceedings, the outcome of which was uncertain at year-end Various lawsuits were pending against the company The company was in the midst of tax proceedings as a result of an examination of the company's federal income tax retums for a penod of 12 years You find that the status of the above matters is as follows at year-end, March 31, 2016 The company is still in default on $4.6 million of the debentures due in 2015 but is trying to negotiate a settlement with remaining bondholders. A large number of bondhoiders have settied their claims at signiticantly less than par The company has renegotiated the 2011 credit agreement, which provides for a two-year moratorium on principal payments and interest at 8 percent. It also limits net losses ($2 25 million for 2016) and requires a certain level or detined cumulative quarterly operating income to be ma ntained The arbitration proceedings were resolved in 2016. The legal actions were settled in 2014 Most of the tax issues have been resolved, and, according to the company's outside legal counsel, those remaining will result in a net cash inlow to the company. At year-end, Paper Packaging had a cash balance or 55.5 milllon and expects to generate a ne cash low or $3.2 million in the upcoming fiscal year The tollowing intonmation about Paper Packaging's plans for its operations tor the iscal year ending in 2017 may also be useful in amiving at a decision. Fiscal Yeat 2017 Budget FrscoN Y 2016 Fiscof Year 201S Budget Nst rovanuas Gross margin Oparating axpenses $60.9 33.6 34.7 6.0 2.1 $79.B 45.6 31.4 Other income (espenses-net Eamings bofore income taes and etraordinary itoms Cash flows 18 1.5 Recoipts 69.9 66.3 3.2 79.7 %.9 228 Required (for this question, you may wish to reference extant auditing standards): a. What should you consider in declding whether to discuss a going concem uncertainty in your report? b. How much influence should the report on the March 31, 2015, financial statements have on your decision? C Should your report for the year ended March 31, 2016 include a discussion of a going concern uncertainty? Briefly explain why or why not