6. You are the auditors of Oldmax Inc. for the year ended 31 December 2020. Fieldwork was completed on 31 January 2021. The audit report is to be dated 1 March 2021 and the financial report is to be issued on 15 March 2021. There are no provisions for lawsuit liabilities in the Oldmax accounts. On 5 January 2021, a customer consumed a drink sold by Oldmax which was contaminated and launched a lawsuit. On 11 February 2021, the lawsuit was settled, which resulted in a material payment by Oldmax to the customer. You discover this fact on 22 February 2021. Assuming there are no other matters of note for the Oldmax engagement, in relation to the financial report, the required action by management is (select the appropriate number):

1 - No action is required

2 - Adjust the financial statements

3 - Disclose in the financial statements

4 - Disclose in the Director's Report

a. 1 b. 2 c. 3 d. 4