IV. Completing the Audit [ 20 pts] 1. The auditor must consider standards when auditing financial statements and when deciding if the client's financial statements are fairly stated. Included are audit decisions concerning whether the client has appropriately reported contingencies. If you were auditing Lands' End [Earth Wear), what three sets of professional standards would you need to consult to make decisions concerning contingencies (no need to list specific standards to answer this]? 2. During our audit of 2019, based on a favorable tax ruling, we conclude that income taxes payable (part of Other Current Liabilities) are overstated by $ 14,000,000. i, Show the complete adjusting journal entry (AJE) you would propose to the client to correct this misstatement: ii. Assume the client decides NOT TO POST THIS AJE. Examine the Lands' End Consolidated Balance Sheet and indicate which financial statement accounts are likely to be misstated. Also state whether they would be understated or overstated: 3. In reviewing evidence concerning contingent liabilities, auditors use a verbal probability scale with 3 levels. List these 3 levels, for each provide a reasonable numerical probability and explain why these are 'reasonable'. IV. Completing the Audit [ 20 pts] 1. The auditor must consider standards when auditing financial statements and when deciding if the client's financial statements are fairly stated. Included are audit decisions concerning whether the client has appropriately reported contingencies. If you were auditing Lands' End [Earth Wear), what three sets of professional standards would you need to consult to make decisions concerning contingencies (no need to list specific standards to answer this]? 2. During our audit of 2019, based on a favorable tax ruling, we conclude that income taxes payable (part of Other Current Liabilities) are overstated by $ 14,000,000. i, Show the complete adjusting journal entry (AJE) you would propose to the client to correct this misstatement: ii. Assume the client decides NOT TO POST THIS AJE. Examine the Lands' End Consolidated Balance Sheet and indicate which financial statement accounts are likely to be misstated. Also state whether they would be understated or overstated: 3. In reviewing evidence concerning contingent liabilities, auditors use a verbal probability scale with 3 levels. List these 3 levels, for each provide a reasonable numerical probability and explain why these are 'reasonable