Question
Mondo Corporation is an oil and gas company with developing properties in South America, Indonesia, and Africa. The company has raised approximately $25,000,000 by issuing
Mondo Corporation is an oil and gas company with developing properties in South America, Indonesia, and Africa. The company has raised approximately $25,000,000 by issuing common shares, which are traded on a Canadian stock exchange, and it has borrowed another $20,000,000 from foreign banks. The auditor, a CPA, investigated a suspicious entry to a suspense account for a $50,000 expenditure that was allocated to 10 different expense accounts in small amounts. The auditor has other evidence, not yet confirmed, that the amount may have been paid as a bribe to a local official to secure a drilling permit. There are other oil and gas companies competing with Mondo to obtain drilling permits as each company is trying to get its oil wells into production as soon as possible to take advantage of high oil prices. In this context, the $50,000 expenditure will be easily recovered by the high profits that the company will earn by selling its product in a market with high demand. The majority shareholder of Mondo Corporation is Mondo-USA, a U.S. holding company. The $50,000 payment is well below the level of materiality, and the client recorded the payment as licence expense on the income statement. Required: Indicate 5 concerns that you would have as the auditor in the above situation regarding the $50,000 payment
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