To: Mr. Taylor, President, Terry Timber Inc.From: External Auditor, Terry Timber Inc.Subject: Advising on the accounting policies of stated matters of Terry Timber Inc. ( TT )Dear Mr. Taylor, Attached is the report you requested regarding the appropriate accounting principles for the matters indicated for TT's financial statements. My goal, as TT's external auditor, is to develop reasonable and justifiable treatments for accounting matters that lead to the achievement of the company's objectives and the objectives of all users. TT Financial Statements (FS) primarily has four users with different objectives, Shareholders: evaluate company performance and growth, increase return on investment, and ensure accurate reporting. Bank - to determine whether the company complies with covenants, to ensure loan repayment and accurate reporting, Union - to evaluate the company's current and future earnings and to see maximum profits, and Mr. Taylor, president of TT (FS preparer) - to maximize profits, evaluate company growth, comply with banking agreements, minimize taxes and ensure accurate financial reporting. There are also other users like CRA/Auditors - to ensure accurate reporting by TT, court (if required during trials) - to see whether FS reports are declared correctly or not. TT is a publicly traded company listed on the Toronto Stock Exchange and is therefore bound by GAAP and must comply with the requirements of Ontario securities laws and exchange rules. TT is also bound by the agreements established by his Bank and must pay particular attention to the current relationship. Furthermore, the union expects a significant profit-sharing plan, so the income reported in this year's financial report will play a crucial role in the negotiations. This time further; auditors will be especially careful during audits due to the shareholder lawsuit, therefore, scrutiny will be high. Below are the issues that must be addressed, while respecting financial reporting constraints. Court cases: TT has two potential court cases against it, the first by shareholders and the second by Mr MacDonald, TT's former chairman. Under GAAP, if the probability of the event occurring is known, the damage is material and measurable, then accrue the cost and disclose it in the financial notes, but if any of the three components are not known, disclose it in the financial notes. In the case of Mac Donald, even though the damage is known and is very material, the probability of its occurrence is unknown.