3. One of your clients is a large jewelry store in downtown Vancouver. The primary reason for the audit is for documenting sales for a lease agreement, and for a small bank loan. The store has been in business for over twenty years, run by a couple, Jan and Jim, close to retirement. Last year, a new manager, Primrose, was hired. Profits boomed as Primrose was put in charge of buying precious stones. Unfortunately, it turned out that Primrose was buying many of her metals and stones from fictitious companies, and was really acting as a fence for stolen goods. Both Primrose and the store have been charged with criminal activities and the store faces a huge fine that could put it out of business. Jan and Jim are furious that you did not detect this criminal activity during your audit. Required: Prepare some points that you could use to discuss with Jan and Jim about the requirements for auditors to detect illegal activities? 5. Black Rock Limited is a marble and tile outlet that has a large outdoor area as well as an indoor showroom for a variety of rock, tile and marble. It is July and your firm has just been appointed auditors for the September year-end audit. The previous firm of auditors had conducted review engagements. The company's bank has asked for audited financial statements for the current year-end. Required:What is the purpose of obtaining knowledge of the client's industry and business environment? Identify at least three procedures that you could undertake in this area. You are auditing Double Rainbow Corporation for the calendar year 2019. Among other items related to the audit, Double Rainbow is being sued for personal injury resulting from the malfunction of one of its products. Sue Ewe filed the lawsuit in September 2019. The officers of the company and its outside legal counsel estimate that the loss from the suit will be approximately $250,000. This amount has been accrued and properly disclosed in the footnotes of the financial statements. You have no reason to believe that the estimate is wrong. You completed your audit and dated your report March 2, 2020. The financial statements were issued on March 14, 2020. The trial was in progress at that date. On March 20, 2020, you read in a national business periodical that the jury in the trial awarded Sue Ewe $1.5 million. Required: Discuss the nature of these events and what responsibility you have, if any, regarding the news of March 20. ic 3. One of your clients is a large jewelry store in downtown Vancouver. The primary reason for the audit is for documenting sales for a lease agreement, and for a small bank loan. The store has been in business for over twenty years, run by a couple, Jan and Jim, close to retirement. Last year, a new manager, Primrose, was hired. Profits boomed as Primrose was put in charge of buying precious stones. Unfortunately, it turned out that Primrose was buying many of her metals and stones from fictitious companies, and was really acting as a fence for stolen goods. Both Primrose and the store have been charged with criminal activities and the store faces a huge fine that could put it out of business. Jan and Jim are furious that you did not detect this criminal activity during your audit. Required: Prepare some points that you could use to discuss with Jan and Jim about the requirements for auditors to detect illegal activities? 5. Black Rock Limited is a marble and tile outlet that has a large outdoor area as well as an indoor showroom for a variety of rock, tile and marble. It is July and your firm has just been appointed auditors for the September year-end audit. The previous firm of auditors had conducted review engagements. The company's bank has asked for audited financial statements for the current year-end. Required:What is the purpose of obtaining knowledge of the client's industry and business environment? Identify at least three procedures that you could undertake in this area. You are auditing Double Rainbow Corporation for the calendar year 2019. Among other items related to the audit, Double Rainbow is being sued for personal injury resulting from the malfunction of one of its products. Sue Ewe filed the lawsuit in September 2019. The officers of the company and its outside legal counsel estimate that the loss from the suit will be approximately $250,000. This amount has been accrued and properly disclosed in the footnotes of the financial statements. You have no reason to believe that the estimate is wrong. You completed your audit and dated your report March 2, 2020. The financial statements were issued on March 14, 2020. The trial was in progress at that date. On March 20, 2020, you read in a national business periodical that the jury in the trial awarded Sue Ewe $1.5 million. Required: Discuss the nature of these events and what responsibility you have, if any, regarding the news of March 20. ic