CAS 560 Subsequent Events requires the auditor to consider material events that they may discover after the end of the financial period. In this assignment, you will apply the requirements of CAS 560 to a number of different scenarios that could arise during the audit of Cloud 9. The end of the financial year is December 31, 2020. The audit report was signed on February 15, 2021. The financial statements were approved by the board of directors on February 15, 2021, and released to the public that same day, along with the auditor's report. You have been given a number of independent situations below. Describe what action should be requested of the client by the auditor in each of the following situations. Potential options include: l requesting that the client make a disclosure in the notes to the financial statements l requesting that the client make an adjustment (name the account) l advising the client of a change in audit opinion (what sort of opinion should be given) l investigating further, l doing nothing Explain your answer. Include an accounting and/or auditing standard and paragraph reference to support your answer.
On August 4, 2021, you discover that one of Cloud 9's customers went bankrupt on July 30, 2021. The amount had appeared collectible at December 31, 2020.

b) During a week of extremely cold weather in January, 2021, a space heater in an employee's office overloaded a circuit breaker, and a small fire broke out. Damage is estimated at $1,200. c) As you were completing the final summary of your working papers for accrued liabilities, an accounts payable clerk informed you that she had discovered the December invoice for utilities had not been entered into accounts payable, in the amount of $43.

d) While walking to the Financial Controller's office on January 15, 2021, you overheard two employees discussing that Cloud 9 carried insufficient insurance to cover its buildings.

e) The January 25, 2021, edition of the National Business Journal announced that Outdoor Depot and The Outdoor Store, both customers of Cloud 9, were entering negotiations to merge their two companies.