auditing 461372

Q.Jerry Jacks, engagement partner for the December 31, 2007, CMA, Ine., financial statement audit, is aware that events and transactions that took place after December 31, 2007 (but before he issues his report dated February 28, 2008), may affect the company’s financial statements. The following material events or transactions have come to Hirsch’s attention.

1. On January 3, 2008, CMA, Inc., received a shipment of raw materials from Canada. The materials had been ordered in October 2007, and shipped FOB shipping point in November 2007.

2. On January 15, 2007, the company settled and paid a personal injury claim of a forA?¬mer employee as the result of an accident that occurred in March 2006. The company had not previously recorded a liability for the claim.

3. On January 25,2008, the company agreed to purchase for cash the outstanding stock of Broward Co. The acquisition is likely to double the sales volume of CMA, Inc.

4. On February 1, 2008, a plant owned by CMA, Inc., was damaged by a flood, reA?¬sulting in an uninsured loss of inventory.

5. On February 5, 2008, CMA, Inc., issued and sold to the general public $2,000,000 in convertible bonds.

Required: For each of the events or transactions, discuss audit procedures that should have brought the item to the auditor’s attention, and the form of (and reasons for) discloA?¬sure in the financial statements.