You are the auditor of Sanitization, Inc., a small public company. Sanitization manufactures and distributes hand sanitizer and cleaning products through a network of independent distributors. You are conducting the audit for the year ended December 31, 2019. Your audit team has set materiality (for the financial statements as a whole) at $540,000. 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 25, 2020):

1. There was a hurricane in New Orleans resulting in serious damage to the Companys main manufacturing plant on March 15, 2020. Even after insurance reimbursements, the Company expects to have material losses as a result of the hurricane. (Note: you do not need to discuss the adequacy of their insurance policy).

2. Sanitization declared a cash dividend of $2.00/common share outstanding on December 27, 2019. The dividend is payable on February 14, 2020 to the common shareholders of record on the declaration date. No entries have been made in the 2019 accounting records related to this declaration. There were 625,210 common shares outstanding on December 27, 2019.

3. A client of Sanitization slipped and broke his hip on December 30, 2019. His family filed a lawsuit against the Company on February 1, 2020 alleging that his accident was caused by the cleaning product purchased from Sanitization. Ms. Clo Rox, the Companys attorney, believes that a significant settlement is probable but the actual amount cannot yet be estimated. The financial statements for the year ended December 31, 2019 do not include an accrual for the pending settlement.

4. The price of Sanitizations stock increased to $85 per share on March 23, 2020 from $51 per share on December 31, 2019 due to the increase in demand resulting from the COVID-19 Pandemic. Its a volatile market!

5. Sanitizations largest customer, Dave N Busters, filed bankruptcy (due to deteriorating financial condition) in March 2020. Sanitization has a material accounts receivable balance due from Dave N Busters as of December 31, 2019.

Your discussion of these situations should have a professional appearance. Your case solution should be approximately 3-5 pages long (double spaced) and include a Works Cited.

1. Write an introductory paragraph describing the underlying requirements of subsequent events procedures an auditor should perform. Also give a brief description of the two types of subsequent events and the related treatment. Cite the appropriate professional literature to support your descriptions. (10 points)

II. For each of the five items listed on the previous page, state the appropriate action for the situation:

1. Adjust the December 31, 2019 financial statements
2. Disclose the information in the Notes to the December 31, 2019 Financial Statements but do not adjust the 2019 financial statements.
3. No action is required

(10 points)

Include a brief statement to justify and explain your response for each of the five items. Please make sure to describe what audit procedures you (the auditor) likely performed which resulted in your discovery of these subsequent events.