Ken Smith, the partner in charge of the audit of Houghton Enterprises, identi?ed the following signi?cant de?ciencies during the audit of the December 31, 2013, ?nancial statements: 1. Controls for granting credit to new customers were not adequate. In particular, the credit department did not adequately check the credit- worthiness of customers with an outside credit agency. 2. There were inadequate physical safeguards over the company