In 2009, Jay Inc. and Vee Ltd., both Canadian manufacturing companies, decided to form a joint venture

Question:

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.

Required:
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 , if any, of Jay. Do not include any analytical procedures in your list.

Contingent liabilities
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a...