Question
You are a CPA and was hired to work for Soaring High Limited as the manager of financial reporting on January 7 th 2021. Your
You are a CPA and was hired to work for Soaring High Limited as the manager of financial reporting on January 7th 2021. Your current duty is to review the first draft of the quarterly reporting package and provide comments to the financial reporting team on any issues that you note. Just prior to reviewing the quarterly report, you were interrupted by an email from Sara, the CFO of Soaring.
The email reads: We have an upcoming audit committee meeting next week and I would like you to prioritize this request and help prepare a response to the management letter we received from the external auditors for the year ended September 31st, 2021 first, before commenting on the quarterly report.
George, who is in charge of our internal audit work among his many other duties has looked into the issues and prepared our responses below. Please review the draft report prepared by George, and make sure that the auditors will be satisfied with our response.
From George, the internal auditor: Management letter and internal audit department responses:
Please find my summary for your perusal. I am sure you will agree with my responses once you go through it. However, if you think we need to implement any new controls, please let me know.
Based on the procedures I performed and those performed by the external auditors at year-end, and the fact that they did not note any material differences, our existing controls are considered adequate.
Company background information: Soaring High Limited is a manufacturer and distributor of Hockey gears for a professional Canadian Sports Association. The manufacturer is established in the US and has been in the business over 20 years. On October 1st, 2019, Soaring High Limited decided to go public. It has one plant in the US, and it has one in Canada that is operated through a subsidiary of Soaring High Limited.
Required:
- You are to comment as a CPA in your current role on the email that you received from Sara, the CEO. What is your reaction to her email? Provide possibly two reasons that would support your answer to fulfill her request or deny it. 5 marks
- In your current role as a CPA, comment on George's email and his response as an internal auditor. What is your reaction after reading his email as well as his response. Do you agree with George's feedback? Support your answers in identifying the functions of an internal auditor. 10 marks
- If you were an external auditor, would you be satisfied with George's substantive testing? Provide your reasoning. Think on the impediments of your future contract with Soaring High. 10 marks
- If you were the management, comment on each issue raised by the external auditor. What is your responsibility? 25 marks
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