Micah and Sarah are working on the audit of Peabody Corporation and are sitting in a meeting to discuss the upcoming audit of the client's loss contingencies. As this is Micah's first audit, he asks Sarah how a client determines the amount of a loss contingency. Which of the following responses by Sarah would be most appropriate to answer this question? Auditing loss contingencies is achieved by following strict rules and standards as promulgated by generally accepted auditing standards. These standards ensure uniformity and consistency in related loss calculations. Auditing loss contingencies is a subjective process. This process involves considerable judgment on the part of the audit firm, and each loss contingency should be assessed on a case-by-case basis. Auditing loss contingencies is a fairly routine and standardized process. The auditors really just have to make sure that appropriate adjustments to stockholders' equity accounts have been recorded correctly. None of these answer choices are correct