Moorfoot plc You are the auditor of Duddingston Limited, a subsidiary of Moorfoot plc. Duddingston is engaged in the production and selling of pharmaceutical products. The managing director of Moorfoot has been talking to you about the issue of internal control and has asked you for advice on the control systems that should be in place in the subsidiary. He is particularly concerned that the company’s products could be dangerous if not used properly. He tells you that products are sold through commission agents to hospitals and family doctors.

These agents do not receive a salary and are thus totally reliant on the commission earned.

Required:

(a) Explain why you believe the Cadbury Committee in 1992 might have decided that directors should issue a statement on the adequacy of internal control systems in use in their companies.

(b) Describe the auditors’ duties with regard to the directors’ statement on internal controls.

(c) Identify the main problems of control at Duddingston Limited and make recommendations to the managing director to address these problems.