Small and Tall,CPAs Completed the December 31,2014 Audit of Big

question 36

Multiple Choice

Small and Tall,CPAs completed the December 31,2014 audit of Big Company on February 10,2015.After the audit report release date,an outstanding lawsuit against Big Company was settled for materially more than recorded in the December 31,2014 financial statements.The amount recorded in the financial statements represented the best estimate of management and the company's attorneys at the time the audit was completed.Based on this new information,Small and Tall,CPAs should

• A) determine whether persons are currently relying on the auditors' reports.
• B) advise the client to make appropriate changes in the financial statements and reissue them.
• C) notify each member of the board of directors of Big Company.
• D) take no action since the event took place after the audit report release date.

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Definitions:

Consumer

Someone who buys or leases real estate, goods, or services for personal, family, or household purposes.

Good Faith

A principle emphasizing honesty and sincerity in dealings, particularly in legal contracts or negotiations, without any intention to deceive or commit fraud.

Depositary Bank

A financial institution that holds securities for investors, managing dividend and interest payments.

Collection

The process of pursuing payments of debts owed by individuals or businesses.