Prepare a audit planning memo for the audit working paper files

Evidence Inc. is a payroll processing firm. Claire and Chuck Stone own the majority of the shares in the Stone Group, which controls Evidence. Chuck is the chair of the board of directors of both Evidence and the Stone Group, and Claire is a director of both companies as well as the CFO of Evidence. Claire and Chuck have a fairly laid-back management style. They trust their workers to work hard for the company, and they reward them well. The accounting staff, in particular, are very loyal to the company. Chuck tells you that some accounting staff enjoy their jobs so much they have never taken holidays, and they rarely take sick leave. Claire and Chuck have not bothered much in the past with formal procedures and policies, but they have requested that the accounting staff start documenting the more common procedures. Claire and Chuck do not conduct formal performance reviews; they rely on their staff to tell them when there is a problem. The accounting department is overseen by Roger Maddow, a designated accountant. He was hired by Claire and Chuck due to his strong credentials and his past experience working with external auditors. The audit of Evidence is now coming to an end. Which of the following are true with respect to Evidence? A. The control environment would be stronger if the CFO and the director positions were split. B. Because this is a small entity, there should be no concern about the control environment. C. Management philosophy and operating style are laid back, suggesting that formal control structures are not in place. D. Although some documentation is now being done, it is being done at a low level rather than being designed by senior management. There is a risk that the documentation will be incomplete without the necessary review procedures. E. Roger was hired due to his knowledge, demonstrating a commitment to competent management. F. The auditor will provide a management letter to Roger. G. The management letter will identify all internal control weaknesses identified