Facts :` Part 3 . Loss Contingencies and Subsequent Event You are auditing a Company ( " XYZ") that manufactures household products ( e. g. kitchen cleanser , liquid soap , etc . ) . The Company has been profitable throughout its history . The Company has a December 31 ST year-end . The audit for the year- ended December 31 , 20 X 1 is going smoothly . You anticipate concluding* the audit by February 28 , 20 * 2 . On February 15 , 20 * 2 , the United States Environmental Protection Agency ( " EPA" ) releases a report stating that one of XYZ's products has been determined to cause cancer and other health related illnesses . XYZ and it's outside legal counsel provide written documentation ( representation and attorney's letters ) stating that there is a reasonable possibility a loss has been incurred but that the amount of the loss cannot be reasonably estimated . Required :` 1 . Is this a Type 1 or Type 2 Subsequent Event ?" 2 . What is the impact of this loss contingency on the XYZ audited financial statements for the year ended December 31 , 20 * 1 ?) Robuble , estimate , Remote, ( 724, 719)