Scenario:

It is August 1, 2021, and L & B is the newly appointed auditor for Company A. A L & B partner, Person S, CPA, updates you, Associate, on the details of the company.

Person S:

Company A is a giftware wholesaler operating out of Edmonton, Alberta. The company purchases several lines of giftware, such as decorative plates, dolls, and candles, from smaller suppliers, and provides one stop shopping for gift stores and souvenir stores across the western Canadian market. Person M, Company A's owner and CEO, fired Person B in April 2021 after it was discovered that Person B had set up fictitious vendors and was collecting payments from Company A personally. Person B hadn't taken any time off in several years, but Person M convinced her to take some vacation. During time Person B was away, the fraud was discovered by the assistant controller, Person D.

Person M is very concerned about this incident and wants to know how such a situation could be avoided in the future. She had Person D provide us with details of the purchases, payables, and payments cycle (Exhibit I). Please discuss any control deficiencies and their implications. Also, as a client service for Person M and Person D, please prepare a memo comprising of a list of control recommendations based on your investigation and explain why these improvements should be incorporated by Company A.

Required: memo containing the information requested by Person S and Person M above.

(hint: you should aim to discuss a minimum of 3 issues)