Question
Julia, a CPA, was scheduled to meet with the client firm's manager, Marcus, on Monday morning to meet any new staff and have a tour
Julia, a CPA, was scheduled to meet with the client firm's manager, Marcus, on Monday morning to meet any new staff and have a tour of the office. The office manager was unable to meet with Julia on Monday and instead left her the following memo:
Julia,
I had to take this week off for personal reasons. Therefore I prepared this memo 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 office staff to meet this year as employee turnover has been high. CCC had to reduce wages for the workers by 20% to stay profitable, so several employees complain that they are underpaid, and about 30% of the staff actually left for new jobs. As the office manager, my wages were only reduced by 10%, because managers are expected to work harder than the regular workers. 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% of the voting shares of CCC-2 and senior executives of both companies own the remaining shares 40%). 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.
Marcus
Identify the concerns you would have as the auditor of CCC, based on the information in the office manager's memo.
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