Lerna Corporation (whose fiscal year will end December 31, 19X8) informs you on December 18, 19X8 that it has a serious shortage of working capital because of heavy operating losses incurred since October 1, 19X8. Application has been made to a bank for a loan, and the bank's loan officer has requested financial statements. Indicate the type of report you would render under each of the following independent sets of circumstances. Give the reasons for your decision.

1. Lerna asks that you save time by auditing the financial statements prepared by Lerna's chief accountant as of September 30, 19X8. The scope of your audit would not be limited by Lerna in any way.

2. Lerna asks that you conduct an audit as of December 15, 19X8. The scope of your audit would not be limited by Lerna in any way.

3. Lerna asks that you conduct an audit as of December 31, 19X8 and render a report by January 16. To save time and reduce the cost of the audit, it is requested that your audit not include circularization of accounts receivable or observation of the taking of inventory.

4. Lerna asks that you prepare financial statements as of December 15, 19X8 from the books and records of the company without audit. The statements are to be submitted on plain paper without your name being associated in any way with them. The reason for your preparing the statements is your familiarity with proper form for financial statements.