When an auditor performed an inventory count at a privately owned medical supply company, it observed that some of the waste from radioactive isotopes produced at that facility three years ago appeared to have leaked into the surrounding soil. The auditor was concerned that these leaks might affect the underground water supply in the com- munity. The company states in its annual audited reports that it is a “model citizen, concerned with maintaining a safe workplace for its employees and a pristine environment for all citizens.”
a. Do the facts discovered by the auditor affect the client’s balance sheet? Explain?
b. Besides possibly adjusting the client’s financial statements, what else should the auditor do, if anything? Explain?