You are the auditor of company A, a public company. Company A manufactures and distributes ski and snowboard equipment worldwide through a network of independent distributors. You are conducting the audit for the year ended December 31, 2016. The following unrelated events occur and/or come to your attention after the balance sheet date but before the date of your opinion on the financial statements (March 3, 2017):

Company A declared a cash dividend of $2.00/common share outstanding on December 26, 2016. The dividend is payable on February 14, 2017 to the common shareholders of record on the declaration date. No entries have been made in the accounting records in relation to this declaration. There were 425,210 common shares outstanding on December 26, 2016.

Q: What's the appropriate action for the situation? (Use a AUC-560 as a reference)

1. Adjust the December 31, 2016 financial statements

2. Disclose the information in a footnote to the December 31, 2016 financial statements but do not adjust the 2016 financial statements.

3. No action is required