The fieldwork for the December 31, 2016 audit of Schmidt Corporation ended on March 17, 2017. The
Question:
The fieldwork for the December 31, 2016 audit of Schmidt Corporation ended on March 17, 2017. The financial statements and auditor's report were mailed March 29, 2017. In each of the situations below, indicate the appropriate action (a, b, c, d, e, f). The possible actions are as follows
a. Request the client to adjust the December 31, 2016 financial statements.
b. Disclose the information in a footnote in the December 31, 2016 financial statements.
c. Request the client recall, revise (with adjustment or footnote disclosure) and reissue the December 31, 2016 financial statements.
d. Request the client to adjust the December 31, 2016 financial statement. Change the audit report date and extend subsequent event testing to the new date.
e. Request the client to recall, revise and reissue the December 31, 2016 financial statement. Change the audit report to a dual dating report.
f. No action is required. The situations are as follows :
________ 1. On April 10, 2017, you discovered that a debtor of Schmidt Corporation went bankrupt on March 18, due to persistent financial health deterioration in recent years.
________ 2. On January 15, 2017, Welder Supply Co., a major customer of Schmidt Corporation declared bankruptcy due to a sudden drop in the market demand of Welder Supply’s products. You didn’t find out about the bankruptcy until March 25, 2017.
________ 3. On March 15, 2017, you noticed that securities held for temporary investment by Schmidt Corporation experienced a significant decrease in market value the day before. ________ 4. On March 20, 2017, another security held for temporary investment by Schmidt Corporation also experienced a significant decrease in market value. You learned of the change in market value the same day.
________ 5. On December 30, 2016, a flood destroyed half of the uninsured inventory in Schmidt's warehouses. You discovered the event on January 10.
Expert Answer:
Case 1Answer c In the given case you have discovered that the debtor went bankrupt after the date of ... View the full answer
