The following situations represent excerpts from the responses to audit inquiries of external legal counsel of xyz co. during the annual audit of year 1 ("legal response"). for each excerpt, select the most appropriate financial statement effect and audit response. each excerpt is independent. responses may be used once, more than once, or not at all from the table below: a. the client’s year end is december 31, year 1. b. the anticipated audit report date is february 15, year 2. c. all amounts are material to the financial statements. financial statement effect audit response 1. no impact on financial statement amounts or notes. 7. legal response is appropriately dated. 2. disclosure in notes relating to nature of litigation, but no amount disclosed. 8. update legal response. 3. disclosure in notes relating to nature of litigation, including loss amount. 9. update audit report date. 4. potential litigation settlement accrued in financial statements. 5. potential litigation settlement not accrued in financial statements, amount disclosed in notes. 6. verify amount due attorney is recorded in financial statement amounts.