Hans & Co. LLP is auditing CCC Inc.'s 2018

financial statements. The firm previously audited the company's

2016 and 2017 financial statements. The 2016 audit

resulted in a qualified opinion because the auditors were

unable to verify the opening inventory for that year, but the

2017 audit resulted in an unqualified opinion. Julia worked

on the previous two audits and is familiar with most of the staff

at CCC, including the accounting manager, Marcus. Julia

was scheduled to meet with Marcus on Monday morning to

meet any new staff and have a tour of the office. The accounting

manager was unable to meet with Julia on Monday, and

instead sent her the following email:

Julia,

I have to take next week off for personal reasons. Therefore,

I prepared this email for you. As you are probably

aware, CCC Inc. has suffered some loss of sales due to

the general economic slowdown experienced by many

companies. 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. CCC

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 her

vacation for the next two years. One of the controller's

many responsibilities is to approve all payments and purchases

from CCC's subsidiary company, CCC-2 Ltd. (As

you know from last year's audit, CCC owns 60 percent

of the voting shares of CCC-2 and senior executives of

both companies own the remaining shares40 percent.)

Being able to purchase goods and materials from CCC-2

at below-market prices is a second reason that CCC 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 next week, so we can meet next

Monday instead.

Regards, Marcus

REQUIRED

Assess control risk at CCC. Justify your response.