Stan Jones was an investor who had recently lost money on his investment in Fine Line Hotels, Inc., and he was anxious to discuss the problem with Janet Todd, a qualified accountant who was his friend and occasional advisor.

“How can they justify this, Janet? This company owns 19.9% of a subsidiary, Far East Hotels, which has apparently sustained some large losses. But these consolidated statements don’t show any of these losses, and the investment in Far East hasn’t been written down to reflect the loss either. I bought my shares in Fine Line just after its last audited statements were made available but just before the papers reported that the statements didn’t reflect any of the losses. What should I do in the future—wait until the papers report the true economic picture? If I can’t rely on audited figures, what’s the sense of having an audit? And don’t tell me that, if the ownership percentage had been 20%, the consolidated statements would have reported the loss. That’s just outrageous.”

Question:-

1. How should Janet Todd respond?