Notes from Audit Working Papers

Payroll - Consistent with audits in prior years, Black & White does not allow RJ to audit the private payroll records, which cover salaries, expense reimbursements, and bonuses paid to the owners and other LeBlanc family members. The CEO of Black & White signs a letter of representation to RJ that says, "All salaries, bonuses, and other payments to the owners and related parties have been approved by me and by the company's board of directors."

To explain this arrangement, the engagement partner noted:

"We don't verify the private payroll records as they are confidential. Since the owners are free to pay themselves any amounts they please, we ask for and receive every year a letter of representation verifying that all payments made are properly approved."

Review for Contingent Liabilities - A legal letter was sent out to the company's lawyers asking them to confirm as at February 15, 2019 whether there were any claims outstanding against Black & White. As of February 28, 2019, no response has been received. Based upon our review of legal expenses and discussion with management, there are no outstanding claims. No further work is necessary.

Review for Subsequent Events - As per discussions held with the CEO and CFO, there were no significant subsequent events. No further work is necessary.

c) -Payroll/ Contingencies/ Subsequent Events List and explain three major deficiencies in the work performed in the testing of payroll, contingencies, and subsequent events.(Use CAS requirements and/or assertions as a basis for your explanation.) Provide recommendations regarding further actions and/or audit procedures.

Deficiency and explanation of why it is a deficiency. (Use CAS requirements and/or assertions as a basis for your explanation)

Provide recommendations regarding further actions and/or audit procedures.