Question
Evans, Inc. (Evans), a calendar-year non-public company, is audited by external auditors on an annual basis. Six months after the annual audit was completed, Fitch,
Evans, Inc. (Evans), a calendar-year non-public company, is audited by external auditors on an annual basis. Six months after the annual audit was completed, Fitch, Inc. approached Evans' shareholders and offered to buy an 80-percent interest in the company by acquiring stock in Evans. The valuation of the stock was to be determined by the financial statements for the nine-month period ended September 30. Shortly after September 30 and before the valuation was completed, Fitch received an anonymous tip that revenue for the nine-month period (January through September), and the accounts receivable balance at September 30 was overstated. A forensic accountant skilled in examination was asked to collect evidence on the possible overstatement of revenue and receivables.
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