Quality Review is the franchisor of a national accounting review course for candidates taking CA, CGA, and CMA examinations. Quality Review is responsible for providing all materials, including DVDs, doing all national and local advertising, and giving assistance in effectively organizing and operating local franchises. The fee to the participant is $1,500 for the full course if all parts of the examination are taken. Quality Review gets 50 percent of the total fee.
The materials for the review course are purchased by Quality Review from Ronnie Johnson, a highly qualified writer of review materials. Quality Review receives one copy of those materials from Ronnie and reproduces them for candidates. Quality Review must pay Ronnie a $60 royalty for each full set of materials used and 12 percent of the participant fee for partial candidates. The contract between Ronnie and Quality Review requires an audited report to be provided by Quality Review on royalties due to Ronnie. Recorded gross fees for the 2009 review course are $1,500,000.
Even before the audit was started, there was a dispute between Quality Review and Ronnie. Quality Review does not intend to pay royalties on certain materials. Ronnie disagrees with that conclusion, but the contract does not specify anything about it. The table on the right lists the disputed sales on which Quality Review refuses to pay royalties:
1. Materials sent to instructors for promotion …………….$31,000
2. Uncollected fees due to bad debts…………………...........…. 6,000
3. Candidates who paid no fee because they per-
   formed administrative duties during the course….....… 16,000
4. Refunds to customers who were dissatisfied with
the course………………………………………............................…… 22,000
Total……………………………………...........................………………$75,000

REQUIRED
a. Assume that you are engaged to do the ordinary audit of Quality Review and the special audit of royalties for Ronnie. What additional audit testing beyond the normal tests of royalties is required because of the special audit?
b. Assume that the financial statements of Quality Review are found to be fairly stated except for the unresolved dispute between Ronnie and Quality Review. Write the appropriate audit report.
c. Write the report for total royalties to Ronnie, assuming that the information as stated in the case is correct and the dispute is not resolved.