L20 Notes_Part_12 - total). The client plans to litigate...

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Emphasis of a Matter AU 508 Under certain circumstances an auditor may want to emphasize a specific matter regarding the financial statements even though he or she intends to express an unqualified opinion. Examples Related Party Transactions Subsequent events Prior year’s F/Ss audited by another firm Contingent liability, other material uncertainties This information should be presented in an explanatory paragraph.
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Audit Reporting Problem Our client’s method of computing percentage depletion has been challenged by the IRS, and a $2 million deficiency has been levied for the last five years (in
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Unformatted text preview: total). The client plans to litigate the matter since management, its tax counsel, and our tax department believe the company has an excellent chance of winning, or, at a minimum, substantially reducing the deficiency. If the courts were to uphold the position of the IRS, the company would also owe $500,000 more in taxes for this year than has been provided. The company has total assets of $125,000,000, stockholders equity of $65 million, current assets of $70 million, and net income of $12 million...
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L20 Notes_Part_12 - total). The client plans to litigate...

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