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Please answer it before 10/30/2016. This is a letter and should be with 2 pages. Case study Your client, Ducks 'R Us (Ducks) was founded
Please answer it before 10/30/2016. This is a letter and should be with 2 pages.
Case study Your client, Ducks 'R Us (\"Ducks\") was founded in 1953 and manufactures rubber ducks for use in bathtubs. Ducks has been very profitable in the past, but sales have been sliding in recent years. The market is now flooded with other bathtub novelties, and recent surveys show that fewer adults find the time to take a relaxing bath. In addition, a lawsuit was filed against the company in the second quarter of 2015. The lawsuit claims that ducks produced in the first quarter of 2015 lost their squeak when immersed in water for an extended period of time. You completed the audit of Ducks' financial statements for 2015 and issued an unqualified opinion on those statements on March 29, 2016. Your report was included in Ducks' financial statements provided to the bank on March 31, 2016. On May 7, 2016, Huey Swann, the President of Ducks, called to tell you about a conversation he had just had with Ducks' attorney. The case regarding the defective ducks had been settled. Unfortunately, the $1.5 million that Ducks anticipated it would settle for (and accrued in the financial statements as of December 2015) was underestimated by $300,000. Ducks' total liability would be $1.8 million based on the settlement. Ducks fully disclosed the settlement in its financial statements for the first quarter ended March 31, 2016 filed with the bank on May 7, 2016. Ducks is in the process of finalizing its annual report to shareholders, which will include your report on the 2015 financial statements. They expect to send out the annual reports on May 18, 2016. Exercise: Write a letter to Huey Swann concerning the audit implications regarding the change in settlement estimate. Assume that Ducks 'R Us is a privately-held company. The letter should include the standard letter components (including Facts, Issues, Authoritiescode in the audit standards like AU-C, assumptions, and implications) that we discussed in class, summarizing your findings and indicating what authority supports your conclusionsStep by Step Solution
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