sus can mean any of her, his, their, your. It depends entirely on the context. Generally where I see Usted instead of tu (or vos, as I live in Argentina) 'su' is used instead of 'tu', and hence 'sus' instead of 'tus'. I don't know whether that's a general rule or just happenchance.
What do you mean? It could be "usted los reconoce" but then how would we know what "los" is replacing? Direct object pronouns replace the direct object to avoid repetition. It's not needed here because if we used it then we wouldn't know what you are acknowledging. The sentence would say "You acknowledge them" instead of "You acknowledge your mistakes". :)