Better Land Company Limited (BLC) is a Hong Kong company with several subsidiaries operating mainly in the waste management and disposal industry. BLC was incorporated in 1981 and has grown to become one of the top four waste management companies in Hong Kong. The business was started by the Wongs family, but currently no family members are actively involved in the management of the company despite their ownership of BLCs ordinary shares. In 2018, the Wong family decided that they would begin the process of selling the company over the next two or three years. In preparation for the sale, the company has engaged your firm, Lo and Partners, to audit the companys financial statements. BLC has an August 31 year-end. It is now September 18, 2020, and your firm is conducting the audit of BLC for the year ended August 31, 2020. You are reviewing the files of BLC and you noted the following events:

- In early 2020, BLC lost a decision in a lawsuit brought by Recycle Systems Integrated Limited (RSI) for patent infringement. In an unusual award, the court ordered BLC to pay $18 million for buying shares of RSI, a private company, which had been in some financial difficulty. BLC has decided not to appeal the decision to the Supreme Court, and the company bought the shares in RSI before year-end.3.