SIMPLY ACCOUNTING LLP, is auditing EIC Inc.'s 2017 financial statements. The firm previously audited the company's 2009 and 2010 financial statements. The 2015 audit resulted in a qualified opinion because the auditors were unable to verify the opening inventory for that year, but the 2016 audit resulted in an unqualified opinion. Julia worked on the previous two audits and is familiar with most of the staff at EIC, including the accounting manager, Marcus. Julia was scheduled to meet with Marcus on Monday morning to meet any new staff and have a tour of the office. The accounting manager was unable to meet with Julia on Monday, and instead sent her the following email:

Julia,

• I have to take next week off for personal reasons. Therefore, I prepared this email for you. As you are probably aware, EIC Inc. has suffered some loss of sales due to the general economic slowdown experienced by many companies. The office procedures and internal controls are the same as last year. You will have many new staff to meet this year as employee turnover has been high. EIC had to reduce wages for most staff by 20% to stay profitable, so several employees complain that they are underpaid, and about 30% of the staff actually left for new jobs. As for my own position, accounting manager, my wages were only reduced by 10%, because managers are expected to work harder than other staff. The staff generally do not believe that we work harder, but, for example, the controller has refused to take any vacation for the past year and does not want to take her vacation for the next two years. One of the controller's many responsibilities is to approve all payments and purchases from EIC's subsidiary company, Zumba Ltd. (As you know from last year's audit, EIC owns 60% of the voting shares of Zumba Ltd and senior executives of both companies own the remaining shares40%). Being able to purchase goods and materials from Zumba Ltd at below market prices is a second reason that EICC has remained profitable, even in the poor economy, so it's very helpful that the controller is never away on vacation.

Regards,

Question

Assess control risk at CCC. Justify your response.