Disclosing Insolvency of Major Customer & Lawsuit Threat:

(a) The auditor should request that the client make a disclosure in the notes to the accounts regarding the insolvency of Backpackz, the major customer. This event is considered a Type 2 subsequent event, as it provides further evidence about conditions that existed at the end of the reporting period. The disclosure should include the nature and impact of the event, as well as any estimated financial effect on the financial statements. The auditor should reference CAS 560, paragraph 13-15 for guidance. (b) The auditor should request that the client make a disclosure in the notes to the accounts regarding the lawsuit threatened by the customer who fell inside an Alpine Bags retail outlet. This event is considered a Type 2 subsequent event, as it provides further evidence about conditions that existed at the end of the reporting period. The disclosure should include the nature and impact of the event, as well as any estimated financial effect on the financial statements. The auditor should reference CAS 560, paragraph 13-15 for guidance. (c) The auditor should advise the client to make an adjustment to the financial statements, specifically to recognize the potential impact of the proposed increase in import duties from China. This event is considered a Type 1 subsequent event, as it provides evidence of conditions that did not exist at the end of the reporting period. The adjustment should reflect the estimated financial effect on the financial statements. The auditor should reference CAS 560, paragraph 10- 12 for guidance. (d) The auditor should request that the client investigate the situation involving the employee stealing cash from Alpine Bags and provide the auditor with additional information. Depending on the findings of the investigation, the auditor may need to advise the client to make an adjustment to the financial statements or disclose the event in the notes to the accounts. This event is considered a Type 2 subsequent event, as it provides further evidence about conditions that existed at the end of the reporting period. The auditor should reference CAS 560, paragraph 13-15 for guidance. (e) The auditor should do nothing regarding the newspaper article about Alpine Bags possibly purchasing the backpack company Groovy Bagz, as this event occurred after the reporting period and is therefore not a subsequent event. The auditor should reference CAS 560, paragraph 6-9 for guidance. To conclude on the appropriate treatment of subsequent events, the auditor may require additional information from the client, such as the impact of the event on the financial statements or the estimated financial effect of the event. The most reliable source for this additional information would be the client's management and external experts, such as legal counsel or industry analysts. The auditor should also consider the completeness and accuracy of the information provided by the client and evaluate the impact of the subsequent event on the financial statements.