Reference no: EM132783439

Below here were subsequent events that occur in your client. Consider that all events were have a material effect on the client's financial statement. The auditor is auditing the financial statement for the year ended December 31, 2018, and is completing the audit on March 15, 2019.

1) On January 10, 2019, the auditor found that client made an overstatement to their inventory account on the 2018 year-end financial statement

2) On January 14, 2019, the court ruling said that the client must pay compensation for the accident that occurred on November 20, 2018

3) On January 31, 2019, the client announced that they do share split 2 for 1 for their entire common shares

4) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2019, and the cost was substantially different than was estimated

5) On February 20, 2019, a major of client customer filled for bankrupt

6) On April 1, 2019 fire rage accident destroy client warehouse and the loss were material

Questions:

a. Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point from 1) to 6). Provide the reason why it should be adjusted or disclose or neither.

b. What will you do, if the client refused to make appropriate adjustment or disclosure even after your inquiry with them and provide working paper and evidence as your supporting suggestion? What will you do then?