3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated 4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 2020 5) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy 6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were material Questions: a. Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither. (30%) b. What effect on auditors’ independent report if client refused to make adjustment or proper disclosure regarding those points, even after the auditor communicate and present working paper evidence and adjustment/disclosure suggestion.
3) The client purchased raw material that was received just before year-end. The purchase was recorded based on its estimated value. The invoice was not received until February 5, 2021, and the cost was substantially different than was estimated
4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 2020
5) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy
6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were material
Questions:
a. Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither. (30%)
b. What effect on auditors’ independent report if client refused to make adjustment or proper disclosure regarding those points, even after the auditor communicate and present working paper evidence and adjustment/disclosure suggestion.
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