Consider the following independent situations.

a. You are conducting the audit of Simon Inc. as of December 31, 2017. As you complete gathering evidence, you become aware that one of Simon's major customers (Smith) is experiencing significant financial difficulties. Smith normally accounts for 5 percent of Simon's net sales. After performing the necessary procedures, you believe that $2.6 million of Smith's receivable balance will ultimately become uncollectible. You further believe this amount is material to Simon's financial condition and results of operations.

b. Your auditing firm, Miller CPA, completed the December 31, 2017 audit of Parker Company on February 9, 2018. Parker Co. is planning on releasing its financial statements, along with the Miller's opinion on the financial statements and internal control over financial reporting, on February 15, 2018. On February 12, 2018, a flood in one of Parker's warehouses in the Gulf Coast region, destroyed over $15 million of inventory. While the extent to which this loss is recoverable through Parker's insurance is uncertain at this time, Miller CPA believes that this loss could have a material impact on Parker's financial condition and results of operations.

For each situation above, describe the most appropriate course of action that should be taken by auditors. Cite the relevant professional standards that apply to the situation.