Consider each of the following independent and material situations. In all situations: the balance date for the companies is 31 December 2022 the field work for the companies was completed 5 February 2023 the financial statements and audit report were signed on 9 February 2023 the financial statements and audit report were mailed to the members on 20 February 2023.

(i) On 2 January 2023, your client informed you that a customer launched a legal action against the company on the 29 December 2021 for a breach of contract. The client's legal team has advised that the company is likely to lose the lawsuit and would be expected to pay damages estimated at $500,000.

(ii) On 8 February 2023, you discovered that a fire broke out in your client firm's warehouse. A significant portion of inventory has been destroyed. The inventories were not insured and the firm has to bear all costs.

(iii) On 21 February 2023, the company announced that due to the excellent financial performance in 2022, they will be paying out dividends of $0.50 per share to shareholders.

(iv) You were informed on 25 February 2023 that a payroll staff member discovered a fraud perpetrated by the payroll manager. The payroll manager had included fictitious employees on the payroll, and made a series of payroll to his bank account. An investigation revealed the fraud began on 8 July 2022. The employee has since been dismissed. The company is currently attempting to recover the amount that was misappropriated.

Required: For each of the above situations, identify: (a) the auditor's responsibility to act. (b) the appropriate treatment of the situation and the reason for that treatment.