During your review of the revenue accounts at piper & pepper inc. ,p&p a public company, you enquired of management about sales to customer account 04-1125. The account accumulates sales to a related company. The president of p&p explained that the sales are at very favorable terms to p&p; in fact, the related company pays more than market value for the items it purchases from p&p. Because of p&p’s tax credits, the overall tax payable for the 2 companies is smaller if the revenue (and the income) is reported in p&p. This provides the related company with higher expenses, which also lowers its taxable income.

Identify and explain the matters that should be communicated to the audit committee.

Answer rating: 100% (QA)

Communications to the Audit Committee An effective twoway communication between audit committee and external auditors is an integral part of the audit ... View the full answer