1. You are performing an annual audit of a company with a December 31, 20Xl year-end. Your fi rm

is planning to complete the audit on March 1, 20X2 and release the report shortly thereafter. On

February 15, 20X2, two material subsequent events occur:

There was a significant fire at one of the company's manufacturing plants, and

One of the company's customers files for bankruptcy; your client had an accounts

receivable of $300,000 from this customer at 12/31/20Xl

What impact, if any, will these two subsequent events have on your client's 12/31/20Xl audited

financial statements?

2. You are auditing a manufacturing client. Over your audit firm's objection, the client uses the

NIFO (next-in, first-out) method to account for inventories. What kind of audit report would you

issue assuming:

the impact is not pervasive

the impact is pervasive

3. What procedures are required on a review engagement?

4. If a CPA firm fails to complete & deliver the client's audited financial statements by the agreed upon due date, the CPA firm can be sued for what?

5. To R. Edward Freeman, what is the primary responsibility of the executive?