[Audit]

12-1. If it occurred after the balance sheet date but before the completion of the audit, which of the following events would require adjustment to the financial statements? a. The sale of one of the clients major product lines as part of a decision to restructure. b. A natural disaster that caused significant damage to the clients physical plant. c. Authorization to issue a new class of cumulative, nonvoting preferred stock. d. Settlement of litigation for more than the amount already accrued.

12-2. What type of opinion, if any, should the auditor issue if clients legal counsel refuses to respond to a letter of inquiry? a. If management addresses this refusal in the letter of representations, an unmodified opinion. b. If the client agrees to terminate its relationship with the attorney, an unmodified opinion. c. An opinion modified for a scope limitation. d. An opinion modified for a FRF departure.

12-3. What type of opinion, if any, should the auditor issue if client management refuses to provide a letter of representations? a. An adverse opinion b. A disclaimer of opinion c. If this refusal is attributable to improper financial reporting, a qualified opinion due to a FRF departure d. If this refusal is considered to be a material weakness in ICFR, an unmodified opinion with an other-matter paragraph