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Background: The firm previously audited the company's 2020 and 2021 financial statements. The 2020 audit resulted in a qualified opinion because the auditors were
Background: The firm previously audited the company's 2020 and 2021 financial statements. The 2020 audit resulted in a qualified opinion because the auditors were unable to verify the opening inventory for that year. The 2021 audit resulted in an unqualified opinion. Ahmed worked on the audits from 2020 and 2021 and is familiar with most of the staff at ORCHID, including the accounting manager, Nina. Ahmed was scheduled to meet with Nina last Friday morning to meet any new staff and have a tour of the office. Nina was unable to meet with Ahmed and provided the following email instead: Ahmed, I have to leave unexpectedly for personal reasons for a few days. I'm sorry I'll have to cancel our meeting today. To help out in light of this, I've prepared this email for you. As you are probably aware, ORCHID Inc. has suffered some loss of sales due to the general economic slowdown experienced by many companies. However, the office procedures and internal controls are the same as last year. You will have many new staff to meet this year as employee turnover has been high. ORCHID had to reduce wages for most staff by 20 percent to stay profitable, so several employees complain that they are underpaid, and about 30 percent of the staff actually left for new jobs. As for my own position, accounting manager, my wages were only reduced by 10 percent, because managers are expected to work harder than other staff. The staff generally do not believe that we work harder, but, for example, the controller has refused to take any vacation for the past year and does not want to take their vacation for the next two years. One of the controller's many responsibilities is to approve all payments and purchases from ORCHID's subsidiary company, ORCHID-2 Ltd. (As you know from last year's audit, ORCHID owns 60 percent of the voting shares of ORCHID-2 and senior executives of both companies own the remaining shares 40 percent.) Being able to purchase goods and materials from ORCHID-2 at below-market prices is a second reason that ORCHID has remained profitable, even in the poor economy, so it's very helpful that the controller is never away on vacation. I will be back in the office late next week, so we can meet then if possible. Regards, Nina
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