): For each of the following independent situations involving non-public companies, assume that you are the audit partner on the engagement. Identify the appropriate type of audit report that should be issued and why. Give the professional standard citation. Assume that all companies are private companies and that each item is material unless indicated otherwise. Some of the relevant professional standards: (AU-C 700-708, 570, 600).
1. Buff Bio is engaged in a hazardous trade and has obtained insurance coverage related to the hazard. Although the likelihood is remote, a material portion of the company’s assets could be destroyed by a serious accident.
2. Bakers-R-Us.com is an Internet based start-up company created to sell baking products online. Although the company had a promising start, a downturn in e-commerce demand for baking goods has negatively affected the company. The company’s cash and sales positions have deteriorated significantly, and after considering identified conditions or events and management’s plans, you have substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time. The financial statements provide adequate disclosure about the entity’s questionable ability to continue as a going concern.