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M. Partner’s engagement review notes.N. Management representation letter.O. Successor auditor’s communication with predecessor auditor.P. Predecessor auditor’s communication with successor auditor.
Items List of SourcesDuring our audit we discovered evidence of the company’s failure to safeguard inventory from loss, damage, and misappropriation.BThe company considers the decline in value of equity securities classified as available-for-sale to be temporaryNThere have been no communications from regulatory agencies concerning noncompliance with or deficiencies in financial reporting practices.NIt is our opinion that the possible liability to the company in this proceeding isnominal in amount.DAs discussed in Note 4 to the financial statements, the company experienced a net loss for the year ended July 31, 2015, and is currently in default under substantially all of its debt agreements. In addition, on September 25, 2015, the company filed a prenegotiated voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. These matters raise substantial doubt about the company’s ability to continue as a going concernLDuring the year under audit, we were advised that management consulted with Gonzales & Ramirez, CPAs. The purpose of this consultation was to obtain another CPA firm’s opinion concerning the company’s recognition of certain revenue that we believe should be deferred to future periods. Gonzales & Ramirez’s opinion was consistent with our opinion, so management did not recognize the revenue in the current year.FThe company believes that all material expenditures that have been deferred to future periods will be recoverable.NOur use of professional judgment and the assessment of audit risk and materiality forthe purpose of our audit mean that matters may have existed that would have been assessed differently by you. We make no representation as to the sufficiency or appropriateness of the information in our working papers for your purposes.PIndicate in the space provided below whether this information agrees with your records. If there are exceptions, please provide any information that will assist the auditor in reconciling the difference.JBlank checks are maintained in an unlocked cabinet along with the check-signing machine. Blank checks and the check-signing machine should be locked in separate locations to prevent the embezzlement of funds.BThe company has insufficient expertise and controls over the selection and application of accounting policies that are in conformity with GAAP.BThe timetable set by management to complete our audit was unreasonable considering the failure of the company’s personnel to complete schedules on a timely basis and delays in providing necessary information.FSeveral employees have disabled the antivirus detection software on their PCs because the software slows the processing of data and occasionally rings false alarms. The company should obtain antivirus software that runs continuously at all system entry points and that cannot be disabled by unauthorized personnel.