Samad & Associates was assigned to conduct an audit for Soya Manis Sdn Bhd. The fieldwork for the year ended 30th June 2021, audit of Soya Manis Sdn Bhd was completed on 19th August 2021. The completed financial statements, accompanied by the signed audit reports, were mailed on 6th September 2021. The following are highly material independent event occurred:

a. On 6th August 2021, the auditor discovered that Soya Manis Sdn Bhd's debtor went bankrupt on 30th July 2021. The cause of the bankruptcy was an unexpected loss of a major lawsuit on 15th July 2021, resulting from a product deficiency suit by a different customer.

b. On 14th December 2021, the auditor discovered that a debtor of Soya Manis Sdn Bhd went bankrupt on 15th July 2021 due to declining financial health caused by pandemic COVID-19. The sale generating the receivable had taken place on 15th January 2021.

c. On 20th July 2016, Soya Manis Sdn Bhd settled a lawsuit out of court that had originated in 2014 and is currently listed as a contingent liability.

d. On 20th July 2021, a lawsuit was filed against Soya Manis Sdn Bhd for a patent infringement action that allegedly took place in early 2021. In the opinion of legal counsel, there is a danger of a significant loss to the client.

Required:

ISA 560 Subsequent Events emphasizes that auditor should consider the effect of subsequent events on the financial statement.

a) Evaluate each of the highly material independent events and decide the auditor's appropriate action with proper justification. Give reason for each of your decision. (16 marks)

b) Distinguish between the two (2) types of subsequent events. (4 marks)