Rayma and Brian are currently working on the audit of Drexel Enterprises, LLC, and are discussing communications with the client's management one day over lunch. Rayma has recently graduated from college, and is working on her first audit, and so asks Brian to provide her with examples of situations and/or issues that the auditor would likely wish to communicate to management. Which of the following represents Brian's most appropriate response to this query? There are various issues that are required to be reported to the client's management, per generally accepted auditing standards, An example of such an issue would be any misstatements noted in the client's cash account. Because we are external auditors, we typically communicate all misstatements immediately to management, and then allow them a prespecified period of time to address and fix these misstatements before we render an audit opinion. There are a whole host of issues that we typically communicate to the client's management. We generally communicate these issues in a representation letter and then follow up with them via an engagement letter. Some examples of issue that we may decide to communicate to the client's management could be noncompliance with laws and regulations, and an identification of fraud or significant errors. During the audit of Apple Company, the auditors, Orange CPAs are concerned about the client's ability to continue operating as a going concern. As a result, a meeting is convened with senior management who advise the auditors that while they are aware of recent liquidity problems, a new line of credit has just been secured with a large bank, which will help the client with the seasonal nature of its business. Official documents received by the bank confirm the existence of this new line of credit. As a result of this, which of the following courses of action is most prudent for the audit firm? The auditors should consider requesting senior management record a contingent liability in the financial statements for any projected liquidity shortages, in order that the accounting principle of conservatism is adhered to. The auditors should consider requesting senior management make appropriate disclosures in the financial statements pertaining to the new line of credit, including reasons why the line of credit was obtained. The auditors should consider contacting the bank that has agreed to provide the line of credit and perform appropriate substantive and analytical procedures to ensure that the bank's liquidity position is strong enough to provide necessary funds to the client. The auditors should consider requesting the client's internal audit function perform quarterly audits on the clients liquidity and solvency positions respectively, and ensure any appropriate accruals and deferrals are made accordingly