The Fieldwork for the December 31, 2018 Audit of Schmidt

question 108

Short Answer

The fieldwork for the December 31, 2018 audit of Schmidt Corporation ended on March 17, 2019. The financial statements and auditor's report were issued on March 29, 2019. In each of the material situations (1 through 5) below, indicate the appropriate action (a, b, c). The possible actions are as follows
a. Adjust the December 31, 2018 financial statements.
b. Disclose the information in a footnote in the December 31, 2018 financial statements.
c. No action is required.
The situations are as follows:
________ 1. On March 1, 2019, one of Schmidt Corporation's major customers declared bankruptcy. The customer's financial condition in 2018 was deteriorating and they owed Schmidt Corporation a large sum of money as of the balance sheet date.
________ 2. On February 17, 2019, Schmidt Corporation sold some machinery for its book value.
________ 3. On February 20, 2019 a flood destroyed the entire uninsured inventory in one of Schmidt's warehouses.
________ 4. On January 5, 2019, there was a significant decline in the market value of the securities held for resale from their value as of the balance sheet date.
________ 5. On March 10, 2019, the company settled a lawsuit at an amount significantly higher than the amount recorded as a liability on the books as of the balance sheet date.

Appreciate the purpose and scope of contract law, including the doctrine of non est factum and its defenses.

Identify the roles of negotiable instruments in overriding privity rules and their impact on assignments.

Recognize the importance of equitable principles in contract law, including undue influence, misinterpretation, and the unconscionable bargain doctrine.

Understand the main sources of household income.

---

Definitions:

S Data

Self-reported data gathered from an individual's assessment of their own behaviors, thoughts, and feelings, typically through questionnaires or interviews.

I Data

This term does not correspond to a widely recognized concept or definition in academic or professional contexts; possibly invalid or too vague.

Objective

An aim or goal that is sought after, often characterized by being measurable and independent of personal feelings or prejudices.

Verifiable

Capable of being proven true or confirmed through evidence or testimony.