(Solved) The following are two unrelated situations. For each situation outline possible deviations (if any) ...

The following are two unrelated situations. For each situation outline possible deviations (if any) from a standard auditor's report that may be necessary, and give reasons. State your assumptions.

A) During 2012, your client was sued by a customer who had a serious car accident as a result of scrap metal that had been dumped in the parking lot. The customer drove over the scrap metal, which was imbedded in the tires of her vehicle. The tires blew, and the car went out of control on a major highway. The amount in dispute is $400,000, with estimated legal bills of about $20,000. The client does not wish to disclose the suit in the financial statements.

B) During the current year, your client leased a large amount of equipment. As the lease qualifies as a capital lease, the equipment has been recorded as an asset, with the corresponding liabilities recorded on the financial statements. The implicit interest rate in the lease is seven percent. The annual payments due over the terms of the lease have been disclosed in the notes to the financial statements.

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The following are two unrelated situations. For each situation outline possible deviations (if any) ...

Auditing: The Art and Science of Assurance Engagements, Canadian Edition

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