Case 2. Nashwa CreditsNefret created 28 fictitious credit memos totaling $363,000 from Nashwa Distributions, the main supplier of health and beauty aids to Nefret. Nefrets controller initially told the auditor that the credits were for returned goods, then said they were a volume discount, and finally stated that they were a payment so that Nefret would continue to use Nashwa as a supplier. However, an Abdul & El-Emir staff auditor noticed the amount and concluded that a $257,000 payment to retain Nefrets business was too large to make economic sense. The credit memos indicated that the credits were for damaged merchandise, volume rebates, and advertising allowances. The audit firm requested a confirmation of the credits. In response, Ramses Abdullah, the president of Nefret Stores, placed a call to Saria Wasir, the president of Nashwa, and handed the phone to the staff auditor. In fact, the call had been placed to an officer of Nefret. The Nefret officer, posing as Wasir, orally confirmed the credits. Nefret refused to allow Abdul & El-Emir to obtain written confirmation supporting the credits. Although the staff auditor doubted the validity of the credits, the audit partner, Mufti Hussein, accepted the credits based on the credit memoranda, telephone confirmation of the credits, and oral representation of Nefret officers.

Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Nefret Stores.