An auditing firm was entrusted by a listed stock company (Stock Company) to audit its accounts for the year ended 31 December 2006. During the process of auditing, the certified public accountants (CPAs) found the following information relevant to the business transactions for the year 2006:(a) On 1 April 2006, Stock Company concluded a contract with an instrument company. Under this contract Stock Company would be responsible for the management of the instrument company for three years. It would be compensated with 30% of the net profit of the instrument company for the management. By the end of 2006, Stock Company received a management fee of RMB 4 million yuan, which accounted for 10% of the net profit of Stock Company. (3 marks)(b) Stock Company was involved in a commercial dispute with a third party and the dispute was brought to the basic level court for trial. Stock Company had disclosed the information on the local newspaper when it received the judgement of the first instance. Both parties to the dispute disagreed with the judgement of the first instance and brought an appeal to the intermediate court. However, the court had not heard the appeal case by the end of 2006. (3 marks)(c) In September 2006, one of the shareholders who held 3% shares of Stock Company placed its shares as guarantee for a loan agreement. (4 marks)Required:For the Items (a), (b) and (c), discuss whether the above-mentioned information of Stock Company should be disclosed to the public in accordance with the relevant provisions of the Securities Law of China.Note: the mark allocation is shown against each of the three items above. (10 marks)
