greg Dawson opened his first Dawson Tea and Spice Shoppe (DTSS) in 2002 in Tempe, Arizona. DTSS originally specialized in selling loose leaf teas, bulk spices, and brewed tea beverages. Over the years, Greg opened additional stores and now has a total of 29 stores located throughout the Southwest. With the additional stores, Greg also expanded the menu. DTSS now sells light breakfast items (scones, muffins, and croissants), sandwiches, salads, soups, and beverages (tea, coffee, espresso, and fresh fruit juices). DTSS continues to sell loose leaf tea and bulk and packaged spices. In January 2019, more than 100 DTSS customers became very ill and required hospitalization. The Centers for Disease Control (CDC) determined this was due to salmonella poisoning that was associated with salads that customers purchased and ate at DTSS. The food poisoning was so severe that some customers experienced kidney and/or liver damage. DTSS was using a new vendor, Marias Euro-Farms, for spinach and leafy greens in the salads, which the CDC determined was the cause of the salmonella poisoning. DTSS did not know much about Marias Euro-Farms other than it had low prices on produce. DTSS had not reviewed Marias Euro-Farms controls and previous issues with salmonella, and DTSS also had not cleaned the produce they received from Marias Euro Farms. Due to the salmonella issue, DTSS no longer uses this vendor and, in fact, Marias Euro-Farms has gone out of business. However, DTSS has received undesirable publicity associated with the food poisoning. This has negatively affected revenue and DTSS is struggling to regain customers. The customers who became ill are understandably upset and want DTSS to pay for their hospital costs as well as for their pain and suffering. Some customers also have chronic liver and kidney issues and want compensation for their ongoing medical bills. thus, class action legal proceedings started in march 2019, with a lawsuit against DTSS seeking $20 million in damages from the company. DTSS has a june 30 year end. DTSS is self insured and, Thus, Greg is concerned about the lawsuit because the company would be liable for any damages awarded. DTSS is a private company with bank loans related to their property, plant, and equipment, DTSS does not issue quarterlyfinancial statements however the bank loans require DTSS to have annual audited financial statements . The accounting of Rossin, Pelling, and Mitchell is working on the audit for the june 30 financial statements which have not yet been issued. as part of the audit procedures, in early august a letter of audit inquiry was sent to DTSS legal counsel. on august 15, 2019 the auditors received the legal representation letter from DTSS legal counsel. the letter indicates that owing to the developments in the case it is probable that DTSS will be found liaable. The lawyers estimate that DTSS can expect to pay between $2million and $3 million in damages and that any number within that range is possible with one number no more likely than another.

you are a new staff person at Rossin, Pelling, and Mitchell and have been assigned to this client Assume today is august 19, 2019.

what are the background facts

issues and questions

analysis with the applicable guidance

anlysis of all issues

this is a financial accounting topic.