Acme Manufacturing Limited (AML) consists of two operating divisions: Acme Plastics, which produces various plastic consumer products, and Acme Chemicals, which uses a by-product of Acme Plastics to produce various resins for sale to other companies for further processing. A summary process chart of the operations and additional comments are included in Exhibit I.
As a result of increasing public concern about environ¬ mental issues, Donna Rideout, the president of AML, has asked the audit engagement partner for AML to provide her with a proposal to conduct an environmental audit of the Acme Plastics division. The results will be used to provide an environmental "report card" for the division and will be included in the company's next annual report to its share¬ holders.
The partner has asked you to provide him with a memo that discusses the unique issues in accepting this type of engagement. Your memo should include a discussion of the audit approach for this engagement and the nature and con¬ tent of the report that would be issued as a result of the environmental audit.
Required Prepare the memo requested by the partner.

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EXHIBIT I Acme Plastics, Summary Process Chart and Additional Comments Summary Process Chart-Acme Plastics Division Heat Various consumer plastic products Sold to customers Various Processed; moulded and polymer resins formed (per Quy-1 Sold to Acme Chemical customer specifications) Water Oxy-2 Disposed of Additional Comments Polymer resins used for the process are purchased from U.S. suppliers and shipped to the plant in specially built tanker trucks used by AML. To avoid contamination of the various resins in transit, it is necessary to rinse the inside of each tank with water after each shipment. Water, obtained from the nearby river, is also used in the process as both an ingredient and a coolant. The coolant water returning to the river is tested regularly to ensure compliance with local regulations. The process requires considerable heat, which is produced by thermal generators that burn natural gas. The gas arrives by pipe-line from the local gas company. Some of the excess heat is recycled throughout the plant to reduce heating costs in winter. The process produces two highly flammable liquid by-products, known as Oxy-1 and Oxy-2. Oxy-1 is packaged into 200 L drums and stored until sold to the Acme Chemical Division. Acme Chemical further processes it into a varnish resin and sells this product to various paint manufacturers At present, there is no commercially viable use for Oxy-2, which is also stored in 200 L drums and kept in a storage area at the back of the property. When necessary (about twice a year), Acme Plastics contracts We-Take-All Ltd., an independent waste disposal company, to have the drums removed.