In connection with your examination of the financial statements of Olars Manufacturing Corporation for the year ended December 31, 19X0, your post-balance-sheet-date review disclosed the following items:

1. January 3, 19X1. The state government approved a plan for the construction of an express highway. The plan will result in the appropriation of a portion of the land area owned by Olars Manufacturing Corporation. Construction will begin in late \(19 \times 1\). No estimate of the condemnation award is available.

2. January 4, 19X1: The funds for a \(\$ 25,000\) loan to the Corporation made by Mr. Olars on July 15, 19X0 were obtained by him by a loan on his personal life insurance policy. The loan was recorded in the account Loan from Officers. Mr. Olars' source of the funds was not disclosed in the Company records. The Corporation pays the premiums on the life insurance policy and Mrs. Olars, wife of the president, is the beneficiary of the policy.

3. January 7, 19X1: The mineral content of a shipment of ore en route on December \(31,19 \times 0\) was determined to be \(72 \%\). The shipment was recorded at year end at an estimated content of \(50 \%\) by a debit to Raw Material Inventory and a credit to Accounts Payable in the amount of \(\$ 20,600\). The final liability to the vendor is based on the actual mineral content of the shipment.

4. January 15, 19X1: Culminating a series of personal disagreements between Mr. Olars, the president, and his brother-in-law, the treasurer, the latter resigned, effective immediately, under an agreement whereby the Corporation would purchase his \(10 \%\) stock ownership at book value as of December 31, 19X0. Payment is to be made in two equal amounts in cash on April 1 and October 1, 19X1. In December the treasurer had obtained a divorce from his wife who was Mr. Olars' sister.

5. January \(31,19 \times 1\) : As a result of reduced sales, production was curtailed in mid-January and some workers were laid off. On February 5, 19X1 all the remaining workers went on strike. To date the strike is unsettled.

6. February 10, 19X1: A contract was signed whereby Mammoth Enterprises purchased from Olars Mfg. Corporation all of the latter's fixed assets (including rights to receive the proceeds of any property condemnation), inventories, and the right to conduct business under the name "Olars Mfg. Division." The effective date of the transfer will be March 1, 19X1. The sale price was \(\$ 500,000\) subject to adjustment following the taking of a physical inventory. Important factors contributing to the decision to enter into the contract were the policy of the board of directors of Mammoth Industries to diversify the firm's activities and the report of a survey conducted by an independent market appraisal firm which revealed a declining market for Olars products.

Required:

Assume that the above items came to your attention prior to completion of your audit work on February 15, 19X1 and that you will render an audit report. For each of the above items:

a. Give the audit procedures, if any, that would have brought the item to your attention. Indisate other sources of information that may have revealed the item.

b. Discuss the disclosure that you wouid recommend for the item, listing all details that you would suggest should be disclosed. Indicate those items or details, if any, that should not be disclosed. Give your reasons for recommending or not recommending disclosure of the items or details.