In your audit of the Strangelove Group, a privately-held company based in Great Britain, you encountered the following situations:

a. The internal control plans in the payables processing area are poorly designed or are not well executed. However, your audit of the area failed to turn up any evidence of misstatement either from error or fraud.

b. Management employs a sophisticated model of its receivables collection patterns in its estimate of uncollectible accounts.

c. Several material errors were found in the inventory calculations, the interest expense accruals, and the proofs of cash. Your negotiations with management on correcting the errors were concluded satisfactorily such that you do not believe any remaining mistatements are material.

d. The order processing department is chronically understaffed and the computer network into which sales orders are entered is antiquated. As a result, customers spend a great deal of time getting through, and many hang up.

e. Although you have no reason to issue an audit report other than the standard unqualified one, you are disappointed in Strangelove's internal auditors, who were frequently uncooperative and preoccupied with other projects.

f. Strangelove employs no unusual accounting methods.

g. Although the audit turned up no evidence of misstatement, the security in the inventory processing/warehouse area probably allows for significant defalcation.

(1) Discuss the manner in which you would communicate any pertinent information to Strangelove, if necessary. Specifically, to whom would the communication be directed, under what heading (e.g., management letter) and to what extent would the item be discussed?

(2) Also, how would your answer be different if Strangelove was a U.S.-registered public company subject to PCAOB AS 2 ?