You are a public accountant in the public accounting firm of Lind and Hemming. One of your larger clients is Yukon Corp., a company incorporated under the Canada Business Corporations Act, which has a December 31 year end. Yukon’s 2011 audit was completed in January 2012; the auditor's report was dated January 28, 2012.
It is now August 2012 and professional staff from your office are working at Yukon doing interim work on the December 31, 2012 audit. Yesterday, the senior in charge of the audit gave you a memo dated August 4,2012, revealing that the staff have discovered that several large blocks of inventory were materially overpriced at December 31, 2011, and have since been written down to reflect their true value.
You have just finished reviewing again the 2011 working papers and have determined that the error was a sampling error; your firm does not appear to have been negligent.
REQUIRED
What action would you take and why? Support your answer.