In the course of performing your audit of the financial statements of a cooperative housing corporation, you notice that the managment of the cooperative authorized the acquisition of a housing unit (apartment) from a shareholer who had not paid its required proprietary maintenance assessment to the cooperative for some time. The purchase price of the unit was booked to an "Other Asset" account on the balance sheet. This unit was secured by a note payable, and the note was properly reflected on the balance sheet.
As the auditor, you are responsible for the expression of an opinion on the financial statements and this opinion is based, in part, on the appropriateness of the accounting policies used.
Please comment on the cooperative's treatment of the transaction and, if necessary, provide a thorough explanation of the corrective measures which the cooperative should take in order to ensure that the financial statements have been presented in accordance with GAAP. In other words, was the accounting treatment appropriate?