You are an audit manager on your firms audit of Hotel Corporation (the Company) as of and for the year ended December 31, 2022. The Company was organized on January 1, 2022, when Jason and Melissa purchased all 10,000 shares of the Companys outstanding common stock ($100 par value) for a total purchase price of $2,000,000. The Company provides electrical construction services on the East Coast of the United States. The Company prepares its financial statements on a US GAAP basis and recognizes revenue on the percentage completion method of accounting. Selected additional information, including the Companys 2022 trial balance follows.

	Hotel corporation
	Adjusted Trial Balance
	12/31/22
	Debits	Credits
Cash	3,015,000
Accounts receivable	1,110,000
Allowance for doubtful accounts		25,000
Contract asset	400,000
Properly and equipment	750,000
Accumulated depreciation		75,000
Accounts payable		225,000
Accrued expenses		25,000
Contract liability		500,000
Note payable bank		1,000,000
Common stock		1,000,000
APIC		1,000,000
Retained earnings
Contract revenues		50,000,000
Cost of contract revenues	48,000,000
Administrative expenses	500,000
Depreciation	75,000
Total	53,850,000	53,850,000

Additional information

The Company has two jobs in process as of December 31, 2022. A copy of the Companys work-in-process schedule follows.

Contract	Value	Cost to date	Total est cost	Earned rev	Billed	Contract asset	Contract liability
A	5,000,000	2,000,000	4,000,000	2,500,000	2,100,000	400,000
B	3,000,000	1,000,000	1,500,000	2,000,000	2,500,000		500,000
TOTALS	8,000,000	3,000,000	5,500,000	4,500,000	4,600,000	400,000	500,000

All billings are recognized as revenue when billed.

In the planning stage of the 2022 audit, the management of the Company provided the following lists of related parties.

Name	Relationship	Est volume	Nature of service
Joe Smith	Son of CEO	100,000	Purchased of scrap steel
Edward Smith Aviation	CEO	50,000	Rental of corporate aircraft
Amy Gust	Board member	75,000	Legal services

Accounts payable detail 12.31.22

Vendor	Amount
Foster electric	75,000
Westinghouse	100,000
Jason Trucking	5,000
Blair lighting	45,000
Total	225,000

The Company pays all amounts due to related parties by the end of the year to satisfy certain tax requirements and there were no amounts payable to related parties as of 12.31.22.

As a part of your firms audit of accounts payable the following payments were made during January 2023 and your work papers include the indicated notations.

Payee	Amount	Date	Auditor notes
Foster electric	75,000	1/15/23	Examined invoice and noted amount is properly included in accounts payable as of 12/31//22.
Westinghouse	100,000	1/15/23	Examined invoice and noted amount is properly included in accounts payable as of 12/31/22.
Jason trucking	5,000	1/15/23	Examined invoice and noted amounts is properly included in accounts payable as of 12/31/22
Blair lighting	45,000	1/15/23	Examined invoice and noted amounts is properly included in accounts payable as of 12/31/22
Lighting consultants of America	600,000	1/15/23	Examined invoice and noted that amount was excluded from 12/31/22 accounts payable but should have been included. Expense relates to contract B. Further discussion with project manager indicate Contract B is a disaster. The $600,000 payment is the first of three identical payments that are expected on this project to rework the lighting design which was the Company's responsibility.

Required

1.- Describe, if any, the audit implications of the payment to Lighting Consultants of America.

2.- Based on your answer to requirement 1, above, calculate the potential impact, if any, of this payment on the Companys 12.31.22 financial statements.