Assume you are an audit manager advising a partner in your firm on issues related to the

severity of internal control deficiencies and what type of audit report to issue. Consider each of

the following independent situations relating to the audit of ICFR, and indicate what type of

audit report your firm should issue and the reason$($s$)$ why. In justifying your decision, please

specifically identify the severity of any internal control deficiency identified.

A$.$ During the audit of Croyden, Inc., you are surprised to find several control deficiencies in

the entity's internal control. You determine that there is a reasonable possibility that

any one of them could result in a misstatement that is significant. Although the odds

are extremely low that the deficiencies, singly or taken together, will result in a material

misstatement of the entity's financial statements, the large number of problems causes

you concern. Management's written assessment concludes that the entity's ICFR was

effective as of the report date.

B$.$ You agreed to perform an audit for Chimv's Co$.,$ after the entity's year$-$end. Due to time

constraints, your audit firm could not complete a full audit of ICFR. However, the

evidence you did collect suggests that the entity has exceptionally strong ICFR. You

seriously doubt that a material weakness would have been found if time had permitted

a more thorough audit. Management's written assessment concludes that the entity's

ICFR was effective as of the report date.

C$.$ MLC Company's management identified a material weakness prior to the $"$as of$"$ date

and implemented controls to correct it$.$ Management believes that the material

weakness has been remediated and that the new controls have been operating for a

sufficient period of time to determine that they are designed and operating effectively.

However, you disagree with the sufficiency of the time period for testing the operating

effectiveness of the controls.