To: Mr. Taylor, President, Terry Timber Inc. From: External Auditor, Terry Timber Inc. Subject: Advice on accounting policies for reported matters of Terry Timber Inc. (TT)Dear Mr. TaylorAttached is the report you requested regarding the appropriate accounting policies for the matters set forth in TT's financial statements. My goal, as an external auditor for TT, is to provide reasonable and supportable treatments for accounting matters that achieve the company's goals and the objectives of all users. TT Financial Statements (FS) have mainly four users. with different objectives, shareholders – to evaluate company performance and growth, increase return on investment and ensure accurate reporting. Bank - to determine whether the company is meeting commitments, ensuring loan repayment and accurate reporting, Union - to assess the company's current and future earnings and maximize profits, and Mr. Taylor, Chairman of TT (FS preparer) - maximize profits, assess business growth, meet banking commitments, minimize taxes and ensure accurate financial reporting. There are also other users, like ARC/auditors - to ensure accuracy of TT reports, court (if requested during testing) - to see if FS reports are presented fairly or not. TT is a publicly traded company listed on the Toronto Stock Exchange. is subject to GAAP and must meet the requirements of Ontario securities laws and stock exchange rules. TT is also constrained by the commitments set by his bank and must be very careful regarding the current ratio. Additionally, the union expects a significant gainsharing plan, so revenues reported in this year's financial report will play a crucial role in negotiations. Further this time; auditors will be especially careful during audits because of shareholder lawsuits. Therefore, monitoring will be rigorous. Here are the questions that need to be resolved, while respecting financial reporting constraints. Legal Actions: TT has two potential legal actions against it, firstly, by shareholders and secondly by Mr MacDonald, former chairman of TT. According to GAAP, if the probability of the event occurring is known, the damage is material and measurable, then recognize the cost and disclose it in the financial notes, but if any of the three elements are not known , indicate this in the financial notes. In the Mac Donald's case - even if the damage is known and very significant, the probability of it occurring is not known.