Final answer:
When a client has a ongoing concern issue, it is management's responsibility to make a note disclosure about the circumstances, including any plans to mitigate option (a). Auditors review this disclosure but do not create it, and liquidation is not the immediate recommendation for ongoing concern issues.
Step-by-step explanation:
If the client has an ongoing concern issue, the correct action is: A) Then management must make a note disclosure about the circumstances, including any plans management may have to mitigate the situation.
According to accounting principles and auditing standards, when there is substantial doubt about a company's ability to continue as a going concern within one year after the financial statements are issued, management is required to evaluate the situation.
If substantial doubt exists, management should include a note in the financial statements that describes the relevant conditions and events that raise doubt about the company's ability to continue as a going concern and any plans to mitigate those conditions or events.
It is not the role of internal or external auditors to make this disclosure, though external auditors are responsible for evaluating how well management's assessment is disclosed in the financial statements and for expressing an opinion on the overall financial statements, which might include an explanatory paragraph if management's disclosures regarding going concern are inadequate or if the auditors conclude that substantial doubt remains despite management's plans.
The auditor may suggest various actions depending on the severity of the situation, but recommending liquidation is typically a last resort and not the immediate response to a going concern issue. This is because there could be various ways to alleviate the concern and allow the company to continue operations.