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In connection with his audit of the December 31, 2017 financial statements of Smith Band Supply, Inc., Norman Godwin, CPA, observed the following material item. Fieldwork was completed on February 14, 2018 and the audit report was issued on February 20, 2018. On January 28, 2018, Smith Band Supply lost a court case that had originated in 2017 and Smith agreed to pay $5,000,000 to the plaintiff. No amount has yet to be accrued for this lawsuit. What should Godwin CPA do?

Group of answer choices

Propose an adjustment and disclosure to the 2017 financial statements

Request the client to recall the December 31, 2017 financial statement for revision

Propose a note disclosure only to the 2017 financial statements

Take no action

Either dual-date the audit report or expand all subsequent event tests to the new date