For each of the following events concerning disclosure of events that took place after year end, discuss the manner in which it should be disclosed in the financial statements or the audit report. Assume that all items are material.

a. Shortly after the audit report has been issued, your client announces a major merger with a competitor. Although the talks had been going on at the time of the audit report's issue, the merger was not considered likely enough to disclose in the financial statements or the audit report.

b. During fieldwork for the fiscal year-end audit, you discover a material error in the mechanical part of the inventory calculationsi Such errors are routine in this industry where profitability limitations do not allow sophisticated inventory control systems.

c. A few months after the issue of the audit report, your client settles a lawsuit for about twice the amount accrued in the financial statements as a contingent liability.

d. During the fiscal year, management had written down an investment in a biotechnology based on their belief that approval by regulatory authorities (essential to its marketability) was unlikely. During fieldwork, regulatory approval is given.

e. Reconsider part

d. Would your answer change if the approval came after the audit report was issued?

f. During the fieldwork portion of the audit, your client announces that it is marketing a new type of microprocessor. Industry analysts are unanimous in their belief that the chip will revolutionize microcomputing and will bring in substantial profits for your client.