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Sloan CPA audits Dechow Ine. for the year ending on December 31, 2019. Sloan CPA audit report was dated February 20,2020 and was released on
Sloan CPA audits Dechow Ine. for the year ending on December 31, 2019. Sloan CPA audit report was dated February 20,2020 and was released on February 27,2020. On February 19,2020, Sloan CPA learned that Dechow Inc. announced on February 19,2020 a product recall due to unexpected product failures. The total expense associated with the recall will be $25 million. Due to the unexpected nature of the product recall, this expense was much higher than what was recognized in the product warranty reserve account in the financial reports of 2019. What is the ap-propriate course of action for Sloan CPA to take? Dual date the audit report by using February 19,2020 as the date for the product recall and using February 20,2019 as the date for all other financial statement line items. Requires Dechow Inc, to disclose the product recall in the footnotes to financial reports of 2019 but make no adjustment to the product warranty reserve account. Ignore the implications of the product recall since it happened after the fiscal year end. Requires Dechow Inc. to adjust the product warranty reserve account to refelet the $25 million expense associated with the product recall in the financial reports of 2019
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