Background: It is January $30,20$X$2.$ You have been working as an associate $($Associate$)$ at Kennedy and Company, a public accounting firm, since this past September. You have been assigned to the review engagement for Hamilton Fencing Ltd$.($Hamilton$).$ The partner for this engagement is Breanne Wilson, CPA. As Hamilton is a new client for the firm, Breanne has completed all new client procedures, and the firm has accepted Hamilton as a client. The company, which is owned $100\%$ by Loretta Vidan, manufactures agricultural fence components and related products from wood. Loretta is in charge of all operating decisions. This is the first year a review engagement is required by Hamilton. Loretta has come to your office to meet with you and Breanne. Loretta: Since Hamilton began five years ago, my father has provided financing through a long$-$term loan. While my father is not involved in the operations of Hamilton, he provides advice from time$-$to$-$time. Recently, we have had a difference of opinion on the direction for Hamilton. As a result, I decided to look elsewhere for financing and approached my local credit union for a term loan to repay my father. The credit union has agreed to provide financing conditional on a review engagement of Hamilton's annual financial statements for the year ended December $31,20$X$1$ being completed. Here are my draft financial statements $($Exhibit I$).$ I do all the day$-$to$-$day accounting. At each year$-$end, my brother, who is a CPA, makes all the year$-$end adjustments in conjunction with a compilation engagement, and prepares our corporate tax return. However, my brother tells me that, due to independence requirements, he cannot complete a review engagement, and he has recommended your firm to do all the work, including any necessary journal entries. Breanne: That is correct. Loretta: This is my first experience with an outside lender. To avoid any additional monthly reporting requirements or stricter terms, I want to ensure we meet all their requirements. Our industry adopts technological changes rapidly, and I need to be in a good position to approach my lender as I expand. I have attempted some of the easier adjustments like amortization $($which is based on monthly use$),$ but there are some transactions that I$\text{'}$m uncertain how to record $($Exhibit I$).$ Breanne: Associate will analyze the transactions and provide any adjustments, along with explanations, for your review and approval. Associate will also prepare a calculation of revised pre$-$tax net income based on any proposed adjustments. Aside from the review engagement, does the credit union have any other terms? Loretta: Yes, security for the term loan will be in the form of accounts receivable, inventory, and property, plant, and equipment. The credit union also required a personal guarantee from me$.$ It also seems very interested in our profitability, so I want to show the best results possible. I am concerned about how much the accounts receivable has increased compared to last year and my brother has agreed to look into this for me$.$ The meeting ends and Loretta leaves. Breanne provides you with more direction. Breanne: Prepare a draft memo to Loretta responding to the requests from Loretta and myself. Ignore first$-$time ASPE transition and first$-$time review engagement issues, taxes, PST$,$ HST$,$ and GST$.$ Situation: In July, Hamilton sold orchard props to a new vineyard owned by a local dentist, for $$5,700.$ Unfortunately, due to the customer$$s lack of experience, the grapes were not harvested soon enough, and an early frost destroyed the entire crop. Hamilton just received notice yesterday that the vineyard has declared bankruptcy and the owner is selling the property. We are part of a large group of unsecured creditors and have been advised we will not recover this money. Please help me answer the questions below: State the issue State why it is an issue Does an existing policy exist or is this a new issue? If there is an existing policy, is it still appropriate? What does ASPE say about this issue? What are the alternatives available under ASPE, if any? What is the impact to the I$/$S$,$ B$/$S$,$ Cash Flow? Quantitative impact? Give your recommendation and state any implementation issues$$tie into context section