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 Sources
During our audit we discovered evidence of the company’s failure to safeguard
inventory from loss, damage, and misappropriation.
B
The company considers the decline in value of equity securities classified as
available-for-sale to be temporary
N
There have been no communications from regulatory agencies concerning
noncompliance with or deficiencies in financial reporting practices.
N
It is our opinion that the possible liability to the company in this proceeding is
nominal in amount.
D
As 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 concern
L
During 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.
F
The company believes that all material expenditures that have been deferred to
future periods will be recoverable.
N
Our use of professional judgment and the assessment of audit risk and materiality for
the 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.
P
Indicate 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.
J
Blank 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.
B
The company has insufficient expertise and controls over the selection and
application of accounting policies that are in conformity with GAAP.
B
The 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.
F
Several 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.
