The fieldwork for the June 30, 2013, audit of Tracy BrewingCompany was finished August 19, 2013, and the completed financial statements, accompanied by the signed audit reports, were mailed September 6, 2013. In each of the highlymaterial independent events (a. through h.), state the appropriate action (1 through 4)for the situation and justify your response. The alternative actions are as follows:1. Adjust the June 30, 2013, financial statements.2. Disclose the information in a footnote in the June 30, 2013, financial statements.3. Request the client to recall the June 30, 2013, statements for revision.4. No action is required.The events are as follows:a. On August 6, 2013, the auditor discovered that a debtor of Tracy Brewing wentbankrupt on July 30, 2013. The cause of the bankruptcy was an unexpected loss ofa major lawsuit on July 15, 2013, resulting from a product deficiency suit by a differentcustomer.b. On December 14, 2013, the auditor discovered that a debtor of Tracy Brewing wentbankrupt on July 15, 2013, due to declining financial health. The sale generating thereceivable had taken place January 15, 2013.
The fieldwork for the June 30, 2013, audit of Tracy Brewing
Company was finished August 19, 2013, and the completed financial statements, accompanied by the signed audit reports, were mailed September 6, 2013. In each of the highly
material independent events (a. through h.), state the appropriate action (1 through 4)
for the situation and justify your response. The alternative actions are as follows:
1. Adjust the June 30, 2013, financial statements.
2. Disclose the information in a footnote in the June 30, 2013, financial statements.
3. Request the client to recall the June 30, 2013, statements for revision.
4. No action is required.
The events are as follows:
a. On August 6, 2013, the auditor discovered that a debtor of Tracy Brewing went
bankrupt on July 30, 2013. The cause of the bankruptcy was an unexpected loss of
a major lawsuit on July 15, 2013, resulting from a product deficiency suit by a different
customer.
b. On December 14, 2013, the auditor discovered that a debtor of Tracy Brewing went
bankrupt on July 15, 2013, due to declining financial health. The sale generating the
receivable had taken place January 15, 2013.
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