Problem
You are an manager who works for Hecht LLP, a local accounting firm. Your client is Triox Co. Triox is a major manufacturer of pharmaceutical products. A significant part of the company's operations involve research and development. Your firm has accepted the engagement to prepare a special report regarding the operations of Triox. (more will be discussed on this in unit five). Any findings in the report will be used to dictate the interest rate for future financing.
You have found that the company is near completion of a drug that is expected to save consumers significant money and compete effectively with the lead brands.
Upon review of the unaudited financial statements, you see a note states the government has provided funding for research contingent on the successful launch of the drug mentioned above. This loan will be forgiven upon successful launch of the product. The loan was not recorded on the books as the CFO of Triox felt that the new drug was near its final stages and would be launched within the timeframes specified in the contract with the government. Upon further enquiry, you also found there have been delays for a number of reasons of the new drug and it is unlikely the drug will be launched in time to meet the terms of the contract with the government.
Required:
Explain any concerns that you have given the recent information regarding the launch of the new drug.
Discuss 5 procedures that you would perform to alleviate these concerns.