Question:
ABC firm is auditing XYZ for three years. two years ago, XYZ received a letter from the provincial government informing the company that it needed to reduce the level of contaminants that it was releasing into the air and local waterways. The deadline for this reduction is three months from today. The letter indicates significant fines (several hundred thousand dollars) will be levied if the targets are not met. Alternatively the company will need to shut down operations until the targets are met. During ABC audit planning process, management informed ABC that the company has not taken any action but plan to start construction of the new pollution devices next month.
Explain the impact the above situation has upon ABC audit planning process.