Access the following publicly available disclosures made by IRIDEX Corporation on the SEC's Web site (www.sec.gov):

● 8-K filed 8-29-2007

● 10-K filed 3-30-2007

● 10-K filed 4-10-2008

● Def 14A (proxy) filed 4-28-2008

● Def 14A (proxy) filed 5-4-2009

a. Review the disclosures in the 10-K filed 3-30-2007. Imagine that you are on PwC's engagement team for the 12-31-2006 year-end audit of IRIDEX. Describe the key business that IRIDEX engages in and list its three most important strategies for success. What risk characteristics of the company indicate that it may have difficulties remaining a going concern?

b. Review the disclosures in the 8-K filed 8-29-2007. What is the purpose of the 8-K filing? What does it reveal about PwC's ongoing relationship with IRIDEX? Based on the disclosures made in the filing, what risk factors were likely most relevant to PwC in making their client continuance decision about IRIDEX?

c. Review the disclosures in the 10-K filed 4-10-2008. Which audit firm accepted IRIDEX as a new client following PwC's resignation? In what important ways does that audit firm differ from PwC? Considering the concept of audit firm portfolio management, discuss why it is reasonable for one audit firm to resign from a client like IRIDEX, and another audit firm to accept it as a new client immediately thereafter.

d. Review the audit fee and total fee disclosures in the Def 14A proxy statements filed 4-28-2008 and 5-4-2009. Use that information to compare and contrast the audit fees and total fees that IRIDEX paid to its auditors for the fiscal years ending 12-31-2006, 2007, and 2008. What inferences do you draw from that comparison?

e. Describe the ethical decisions that an auditor must make during portfolio management decisions, such as the client acceptance and client continuance decision. What is the relationship between ethics and audit quality?