The financial year of your audit client Pickles Ltd ended on 31 December 2019. Your audit report was signed on 20 February 2020 and the financial statements were issued on 5 March 2020.

Each of the following independent events, which the auditors have discovered after the end of the financial year, have a material effect on the financial statements:

1. 14 February 2020

   You found that the audit client had lost a court case for breaching a contract with a supplier. The litigation started on 2 February 2019. The company is required to pay $45,000 damages to the supplier.

2. 27 February 2020 Pickles Ltd announced that it is making a takeover offer for another company.

Required:

For each of the two events above, explain the auditors responsibilities and the auditors appropriate course of action.