Reference no: EM132813884

Question - Nickerson Autobody holds the master regional franchise for southwestern Ontario for a national chain of automobile repair shops. They work closely with insurers to repair vehicles damaged in accidents. The most expensive form of repair is to straighten a bent frame. Straightening a frame is only done on vehicles less than five years and with residual values exceeding $25,000 pre-accident. An accident causing a bent frame severely reduces the resale value of a vehicle and by law must be reported to the government.

A recent television news investigation found that several franchisees were accepting payments from customers directly for frame straightening. As a result, the insurance company is not informed of the damage and the damage is reported as minor body panel damage to the government. An experienced tow truck driver can spot a bent frame easily. Since everything is "off the books" the tow truck driver gets a share of the cost of the repair, the franchisee gets "tax free" revenue, and the car owner can get many thousands more in resale than what they paid in cash.

As the master franchise holder, Nickerson sued the television network defamation citing a loss of $15,000,000 for the value of their franchise rights. Most legal experts interviewed on TV have said that since the investigation report was factual, there is no chance of success for the lawsuit. Nonetheless, when Elliott and Page, LLP came in to do the audit, no write down of the franchise was recorded on Nickerson's books. Nickerson is privately owned and requires the audit for purposes of bank financing.

Required - What are Elliott and Page's reporting options?