Active Gaming Ltd. (AGL) is a developer and distributor of video games. The Company became public three years ago, and now trades on the Toronto Stock Exchange under the ticker AGL. Their main source of revenue is from packaged video games, although the Company has begun to earn more significant revenues from mobile device games and online gaming. The video game industry is characterized by its many participants frequently launching new games, which may be new game concepts or sequels of popular game franchises. AGL has five popular sports game franchises, and two role playing franchises. In addition, AGL is always developing and offering new products in the hopes that it too will become a franchise title. The fierce competition in the industry is based on product quality and features, timing of product releases, brand-name recognition, availability and quality of in-game content, access to distribution channels, effectiveness of marketing and price. Many analysts have been following AGLs stock since its initial public offering. The following are the analysts expectation of AGLs EPS, along with the reported earnings: 2023 2022 2021 Expectation 0.07 0.05 (0.15) Actual ? (0.03) (0.11) Surprise ? (0.08) 0.04 AGL missed earnings expectations in 2022, but, exceeded expectations in 2021. AGLs share price reacts significantly to the earnings surprise. The following chart outlines AGLs share price over the past three years, and highlights the earnings announcement dates: 1 2 3 4 5 6 7 8 9 Stock Price 2015 Earnings Announment Date 2014 Earnings Announment Date 2022 Earnings Announcement 2021 Earnings Announcement Management of AGL does not want to disappoint the analysts again this year, following fiscal 2022s large, negative earnings surprise. The most recent run-up in share price is the result of analysts expectations that AGL can continue to grow earnings and reporting positive earnings. These expectations are based on a combination of management issuing positive earnings guidance, positive earnings surprises reported by many industry competitors and the growth potential offered by the mobile gaming industry. Smith and Kabir, LLP has been AGLs auditor since inception and you have been the audit senior on the file for the past three years. Recently, Tammy Hawk, the partner in charge of the audit, met with management of AGL to discuss the upcoming year-end audit. Management displayed their pleasure with the current years financial performance as EPS exceed the analysts estimate. Tammy has called you into his office to discuss the results of his meeting. She has provided you with the draft financial statements (Exhibit I), along with her notes from the meeting (Exhibit II). Tammy has asked that you prepare a report addressing the accounting issues that can be used at the next meeting between Tammy and AGL management. Required Prepare the report.