The field work for the June 30, 2014, audit of a company was finished August 30, 2014, and the completed financial statements, accompanied by the signed audit reports, were mailed September 15, 2015. In each of the highly material independent events (a through e), state the appropriate action (1 through 4) for the situation and justify your response. The alternative actions are as follows:

Adjust the June 30, 2014, financial statements.

Disclose the information in a footnote in the June 30, 2015, financial statements

Request the client to recall the June 30, 2014

No action is required.

On May 31, 2014, the auditor discovered an uninsured lawsuit against the company that had originated on February 28, 2014.

On July 20, 2014, the company settled a lawsuit out of court that had originated in 2010 and is currently listed as a contingent liability.

On December 14, 2014, the auditor discovered a debtor of the company went bankrupt on November 1, 2014. The sale had taken place April 15, 2014, but the amount appeared collectible at June 30, 2014, and August 30, 2014.

On August 10, 2014, the auditor discovered a debtor of the company went bankrupt on July 30, 2014. The cause of the bankrupt was an unexpected loss of major lawsuit on July 15, 2014, resulting from a product deficiency suit by a different customers.

On September 14, 2014, the company lost a court case that had originated in 2010 for an amount equal to the lawsuit. The June 30, 2014 footnotes state that in the opinion of legal counsel there will be a favorable settlement.

Highly material independent events	Appropriate Action	Justification
On May 31, 2014, the auditor discovered an uninsured lawsuit against company that had originated on February 28, 2014.
On July 20, 2014, the company settled a lawsuit out of court that had originated in 2010 and is currently listed as a contingent liability.
On December 14, 2014, the auditor discovered a debtor of the company went bankrupt on November 1, 2014. The sale had taken place April 15, 2014, but the amount appeared collectible at June 30, 2014, and August 30, 2014.
On August 10, 2014, the auditor discovered a debtor of the company went bankrupt on July 30, 2014. The cause of the bankrupt was an unexpected loss of major lawsuit on July 15, 2014, resulting from a product deficiency suit by a different customers.
On September 14, 2014, the company lost a court case that had originated in 2010 for an amount equal to the lawsuit. The June 30, 2014 footnotes state that in the opinion of legal counsel there will be a favorable settlement.