Ken Smith, the partner in charge of the audit of Houghton Enterprises, identified the following significant deficiencies
Question:
Ken Smith, the partner in charge of the audit of Houghton Enterprises, identified the following significant deficiencies during the audit of the December 31, 2013, financial statements:
1. Controls for granting credit to new customers were not adequate. In particular, the credit department did not adequately check the credit-worthiness of customers with an outside credit agency.
2. There were inadequate physical safeguards over the company’s inventory. No safeguards prevented employees from stealing high- value inventory parts.
Required:
a. Draft the required communications to the management of Houghton Enterprises, assuming that both items are significant deficiencies.
b. Assume that Smith determined that the second item was a material weakness. How would the required communication change?
Step by Step Answer:
a The following communication is the report on significant deficiencies for Houghton Enterprises In planning and performing our audit of the financial statements of Houghton Enterprises as of and for ...View the full answer
Auditing and Assurance Services A Systematic Approach
ISBN: 978-1259162343
9th edition
Authors: William Messier, Steven Glover, Douglas Prawitt
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