Question: . I would issue an adverse financial statement audit opinion. But not sure if it is correct. You are auditing Diverse Carbon, a manufacturer of

. I would issue an adverse financial statement audit opinion. But not sure if it is correct.

You are auditing Diverse Carbon, a manufacturer of nerve gas for the military, for the year ended September 30. On September 1, one of its manufacturing plants caught fire, releasing nerve gas into the surrounding area. Two thousand people were killed and numerous others paralyzed. The companys legal counsel indicates that the company is liable and that the amount of the liability can be reasonably estimated, but the company refuses to disclose this information in the financial statements.

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