The following data were gathered during an internal auditor's investigation of the reason for a material increase in bad debts expense. In preparing an engagement communication, each of the items might be classified as criteria, condition, cause, effect, or background information. 1. Very large orders require management's approval of credit. 2. Engagement procedures showed that sales personnel regularly disregard credit guidelines when dealing with established customers. 3. A monthly report of write-offs is prepared but distributed only to the accounting department. 4. Credit reports are used only on new accounts. 5. Accounting department records suggest that uncollectible accounts could increase by 5% for the current year. 6. The bad debts loss increased by US $100,000 during the last fiscal year. 7. Even though procedures and criteria were changed to reduce the amount of bad-debt write-offs, the loss of commissions because of written-off accounts has increased for some sales personnel. 8. Credit department policy requires the review of credit references for all new accounts. 9. Current payment records are to be reviewed before extending additional credit to open accounts. 10. To reduce costs, the use of outside credit reports was suspended on several occasions. 11. Because several staff positions in the credit department were eliminated to reduce costs, some new accounts have received only cursory review. 12. According to the new credit manager, strict adherence