In 2009, Jay Inc. and Vee Ltd., both Canadian manufacturing companies, decided to form a joint venture to build and operate a manufacturing plant in Asia. Their joint venture would have lower operating costs and faster access to Asian markets. Your audit client, Jay, borrowed $4,000,000 and arranged for further long-term debt from its banker, Manufacturing Bank of Canada. Jay is currently being sued because it cancelled a purchase agreement it had with another company, Boilers Inc., to purchase some equipment.
Prepare four audit procedures, in addition to obtaining a representation from the audtitee management and communicating with the company’s law firm, to identify the contingent liabilities, if any, of Jay. Do not include any analytical procedures in your list.