ave been assigned to the December 31, 2011, year-end inancial statement audit for Omega Properties, one of your irms largest clients. During planning, your audit manager has assigned you the task of preparing the audit program for the mortgages payable account. Omega is a real estate investment company which owns three oice towers, one each in To- ronto, Vancouver, and Calgary. Omega has always enjoyed a decent proit due to the high demand for prime oice space in these cities. Unfortunately, the recent recession has been hard on Omega as vacancy rates have increased in many oice towers and the going rate per square foot has dropped considerably. his has caused a severe cash strain on Omega. he mortgages payable on these three buildings is at a ixed rate. To add to the problem, the long-term leases for many of Omegas big tenants are up for renewal over the next few years. Omega knows that they will be lucky to get the new leases signed at 75% of the existing rates, and there is a threat that some will move out. You start to gather some information about the mortgages payable account. You learn that the bank that holds the mortgage on these properties requires a debt to equity ratio of 2:1. Omega has always stayed within the ratio limits. However, for the past two years they have been close to viola- tion. You also learn that the company was late in paying their monthly mortgage payment twice this year and was warned by the bank. It is now February 4, 2012, and you ind out that Omega has just defaulted on their mortgage payment due on February 1. he bank has just threatened to foreclose on the mortgage. You now discover that what started out as a basic audit of mortgages payable has ballooned into something a little more serious. In addition to the audit program, you decide to send an e-mail to your audit manager informing her of additional audit issues that have arisen as a result of this event, and the impact this has on your audit procedures, the entire audit, and the audit report.