TAA Stores is a large retail company. The company has recently expanded from 6 to 16 stores by borrowing from four banks and from a public offering of common stock. A recent investigation has disclosed that TAA materially overstated net income. The company understated their accounts payable(AP) and recorded fictitious supplier credits that further reduced accounts payable. As a result, an Income & Sales Tax Department investigation was critical of the evidence gathered by TAAs audit firm, KPMT, in testing accounts payable and the supplier credits. 1 . KPP Advertising CreditsTAA had arrangements with some vendors to share the cost of advertising the vendors product. The arrangements were usually agreed to in advance by the vendor and supported by evidence of the placing of the ad. TAA created a 125-page list of approximately 500 vendors, supporting advertising credits of $250000. KPMTs auditors selected a sample of 4 of the 1250 items for direct confirmation. One item was confirmed verbally, one traced to cash receipts, one to a vendors credit memo for part of the amount and cash receipts for the rest, and one to a vendors credit memo. one of the amount confirmed differed from the amount on the list, but the auditors did not seek an explanation for the differences because the amount was not material. The rest of the credits were tested by selecting 15 items (several from each page of the list). Seven of the items were supported by examining the ads placed, and eight were supported by TAA debit memos charging the vendors for the promotional allowances. 2. NTPP CreditsTAA created 14 fictitious credit memos totaling $180000 from NTPP Distributions, the main supplier of health and beauty aids to TAA. TAAs controller initially informed the auditor that the credits were for returned goods, then said they were a volume discount, and finally stated that they were a payment so that TAA would continue to use NTPP as a supplier. However, KPMT staff auditor noticed the amount and concluded that a $125000 payment to retain TAAs business was too large to make economic sense. The credit memos indicated that the credits were for damaged merchandise, volume rebates, and advertising allowances. The audit firm requested a confirmation of the credits. In response, Ali ALahli, the president of TAA Stores, placed a call to Sami Alnaser , the president of NTPP, and handed the phone to the staff auditor. In fact, the call had been placed to an officer of NTPP . The NTPP officer, posing as Alnaser, orally confirmed the credits. NTPP refused to allow KPMT to obtain written confirmation supporting the credits. Although the staff auditor doubted the validity of the credits, the audit partner, Mohammad hamad, accepted the credits based on the credit memoranda, telephone confirmation of the credits, and oral representation of NTPP officers. 3. Salem Credits-$75,000 in credits based on 17 credit memoranda from Salem, Inc., were purportedly for the return of overstocked goods from several TAA stores. An KPMT staff auditor noted the size of the credit and that the credit memos were dated subsequent to year-end. He further noticed that a sentence on the credit memos from Salem had been obliterated by a felt-tip marker. When held to the light, the accountant could read that the marked-out sentence read, Do not post until merchandise received. The staff auditor thereafter called Sulaiman, treasurer of Salem, Inc., and was informed that the $75000 in goods had not been returned and the money was not owed to TAA by Salem. Sultan, president of TAA, advised Hamad , audit partner, not to have anyone call Sulatn to verify the amount because of pending litigation between TAA and Salem, Inc. Requirement Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of TAA Stores.