DQ 1 During the December 31, 2020 year end audit of an electronic game manufacturing company (games that play on the Wii or Xbox), you have become aware of the following through discussions with the client, reading corporate minutes and reviewing correspondence files A former employee has brought a wrongful discharge and age discrimination suit against the company The case is in the discovery phase and is not expected to go to trial until 2022 The employee is suing the company for $500,000 in lost wages and $100,000 in pain and suffering as a result of the discharge The company is not looking to settle The company is suing a competitor for copyright infringement for $1,000,000 Legal counsel does not believe the suit will go to trial but is fairly certain they will receive an out of court settlement by the end of the third quarter of 2021 totaling $500,000 A customer is suing the company for $250,000 on the basis of damage to their child's eyes as a result of excessive use of the game Legal counsel believes this is a frivolous suit and no action will result, but the company is considering an out of court settlement of $10,000 to avoid damaging publicity The January 2021 board minutes indicate that a competitor has filed a complaint in the U S District Court asserting antitrust and unfair competition claims against the company A class action securities suit has been filed against the company alleging asserted claims under certain sections of the Securities Exchange Act of 1934 based on alleged false and misleading disclosures or omissions regarding the Company's financial statements, governmental investigations and internal controls The lawsuit filed was for $10,000,000, but was dismissed by the court The plaintiff has appealed and legal counsel has offered a settlement of $2,000,000 in return for dismissal of all charges If the settlement does not take place, the company will continue its defense of the appeal For each item, explain how you would determine the materiality of the lawsuits and proper disclosures in the financial statements DQ 2 What is meant by attestation standards and distinguish between attestation standards and generally accepted auditing standards Why might a client choose a review engagement under attestations services rather than an audit

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DQ #1 - During the December 31, 2020 year-end audit of an electronic game manufacturing company (games that play on the Wii or Xbox), you

DQ #1 - During the December 31, 2020 year-end audit of an electronic game manufacturing company (games that play on the Wii or Xbox), you have become aware of the following through discussions with the client, reading corporate minutes and reviewing correspondence files:

A former employee has brought a wrongful discharge and age discrimination suit against the company. The case is in the discovery phase and is not expected to go to trial until 2022. The employee is suing the company for $500,000 in lost wages and $100,000 in pain and suffering as a result of the discharge. The company is not looking to settle.
The company is suing a competitor for copyright infringement for $1,000,000. Legal counsel does not believe the suit will go to trial but is fairly certain they will receive an out of court settlement by the end of the third quarter of 2021 totaling $500,000.
A customer is suing the company for $250,000 on the basis of damage to their child's eyes as a result of excessive use of the game. Legal counsel believes this is a frivolous suit and no action will result, but the company is considering an out of court settlement of $10,000 to avoid damaging publicity.
The January 2021 board minutes indicate that a competitor has filed a complaint in the U.S. District Court asserting antitrust and unfair competition claims against the company.
A class action securities suit has been filed against the company alleging asserted claims under certain sections of the Securities Exchange Act of 1934 based on alleged false and misleading disclosures or omissions regarding the Company's financial statements, governmental investigations and internal controls. The lawsuit filed was for $10,000,000, but was dismissed by the court. The plaintiff has appealed and legal counsel has offered a settlement of $2,000,000 in return for dismissal of all charges. If the settlement does not take place, the company will continue its defense of the appeal.

For each item, explain how you would determine the materiality of the lawsuits and proper disclosures in the financial statements.

DQ#2 - What is meant by attestation standards and distinguish between attestation standards and generally accepted auditing standards. Why might a client choose a review engagement under attestations services rather than an audit?