Materiality The planning materiality was set at $242,000. 1. Internal control A When the controller left, the finance department staff took on additional duties. We noted that during the latte part of the year, the same individual created purchase orders, entered invoices into the system, and prepared th cheque runs. The CFO said the situation was unavoidable and noted that the accounting manager reviewed the cheque runs and prepared the bank reconciliations. B. We noted that many journal entries had not been approved. The CFO said that he trained most of the employee responsible for the entries, so he knows what the entries are for. He also said, "Our management review of report and financial statements would uncover any incorrect entries." C. The CFO relies on senior management to review, approve, and sign reports generated by the finance department such as the costing report by the project. Testing of a sample of reports indicated that most reports had bee appropriately approved. However, some reports were found on a construction manager's desk. When aske about them, she explained, "I'm so busy managing the jobs that I have that I haven't had time yet to look ther over." The signed reports were given to the audit team the next day, and the audit testing was completed. 2. Accounts receivable and allowance for doubtful accounts We sent confirmations to a sample of accounts receivable and noted the following issues based on th responses received: One confirmation was returned stating that a receivable balance related to a $1,542,000 contract was overstate based on the progress report. Upon examining the relevant report, we noted that a transposition error occurred (86 percent completion was used when it should have been 68 percent). This represents a known error $277,560. The CFO agreed that it was an error but was satisfied that this was an isolated issue and woul typically have been caught by the supervisor's review. The CFO does not want to adjust for this error. The CFO was quite adamant that no adjustments be made to the financial statements, declaring that "th statements fairly and accurately represent the financial situation of BCC." Tasks: What type of audit report should be prepared, assuming the CFO does not change his position? Discuss. Prepare the draft management letter