Background:	We are performing an audit for an existing client (this is year two of the audit relationship). This is a 12/31/13 year-end audit.
	Overall financial statement materiality (performance materiality)			$1,000,000
	Passed adjustment scope			$100,000
	Private company financials (so not a public entity - FASB entity)
				2012	2013
	Total Assets			$50,000,000	$55,000,000
	Total Liabilities			$25,000,000	$27,500,000
	Total Revenues			$150,000,000	$145,000,000
	Total Expenses			$139,000,000	$130,000,000
	Net Income			$11,000,000	$15,000,000
	During our final analytical review procedures of expenses we identified $1,500,000 of professional services the client expensed in 2013, however, upon review of the invoice detail, it appears the services relate to 2012 activity and therefore should have been expensed in 2012 as opposed to 2013. There was no accrual recorded as of 12-31-12 for these services.
Question #1	Based on the above fact pattern what are some of the potential issues that need to be evaluated? How would the audit opinion and the financial statements for the 2013 and 2012 time period be impacted? Consider the guidance in AU-C Sections 320, 560,706, and 708
Question #2	How would you go about discussing these issues with the client? Let's assume the client did not tell us about the identified expense item.
Question #3	If the missed professional services were for $500,000, would this impact your overall analysis, if so, how?
Question #4	If there are no external users of the financial statements (i.e. the company does not have any debt and is owned by one individual). Does this change our overall thought pattern if the error was for $1,000,000 or $500,000?
Question #5	How would the above be impacted if the client elected to present single year financials (i.e. only presenting 2013 financial statements and not presenting 2012 for comparative purposes)?