You are a quality control specialist in your CPA firm. This includes being available for consultation on various professional practice matters.

Below are independent and unrelated situations that are on your desk right now that are pending your expertise: The Company under audit has a long term contract with a fixed price of $ 6,000,000. It began in 2022 and is expected to be finished in 2024. The expected total costs at the inception of the contract in 2022 were $ 4,000,000leaving a gross profit of $ 2,000,000. Actual costs incurred in 2022 were $ 1,500,000. By the end of 2023 (the current year) expected remaining costs to complete were now $ 2,200,000, yet they incurred actual costs of $ 1,400,000 in the year.

The Company uses the percentage of completion method to account for this contract.

What audit work should we do related to this contract in 2023? Required:

Adopt the role of the quality control expert and give detailed advice with support to help resolve the issues noted above.