You are the manager responsible for the quality of the audits of new clients of Signet, a firm of Chartered Certified Accountants. You are visiting the audit team at the head office of Agnesal Co. The audit team comprises Artur Bois (audit supervisor), Carla Davini (senior auditor) and Errol Flyte and Gavin Holst (trainees). The company provides food hygiene services which include the evaluation of risks of contamination, carrying out bacteriological tests and providing advice on health regulations and waste disposal. Agnesal's principal customers include food processing companies, wholesale fresh food markets (meat, fish and dairy products)and bottling plants. The draft accounts for the year ended 31 December 2013 show turnover $19.8 million (2012 $13.8 million) and total assets $6.1 million (2012 $4.2 million).

You have summarised the findings of your visit and review of the audit working papers relating to the audit of the financial statement for the year to 31 December 2013 as follows:

1. Against the analytical procedures section of the audit planning checklist, Carla has written "not applicable new client". The audit planning checklist has not been signed off as having been reviewed by Artur.
2. Artur is currently assigned to three other jobs and is working from Signet's office. He last visited Agnesal's office when the final audit commenced two weeks ago. In the meantime, Carla has completed the audit of tangible non-current assets (including property and service equipment) which amount to $11 million as at 31 December 2013 (2012 $1.1 million)
3. Errol has just finished sending out the requests for confirmation of accounts receivable balances as at 31 December 2013 when trade accounts receivable amounted to $3.5 million (2012 $1.6 million).
4. Agnesal's purchase clerk, Jules Java, keeps $2,500 cash to meet sundry expenses. The audit program shows that counting it is "outstanding". Carla has explained that when Gavin was sent to count it he reported back, two hours later, that he had not done it because it had not been convenient for Jules. Gavin had, instead, been explaining to Errol how to extract samples using value-weighted selection. Although Jules had later announced that he was ready to have his cash counted, Carla decided to postpone it until later in the audit. This is not documented in the audit working papers.
5. Errol has been assigned to the audit of inventory (comprising consumable supplies) which amounts to $150,000 (2012 $90,000). Signet was not appointed as auditor until after the year-end physical count. Errol has therefore carried out tests of controls over purchases and issues to confirm the "roll-back" of a sample of current quantities to quantities as at the year-end count.
6. Agnesal has drafted its first "Report to Society" which contains health, safety and environmental performance data for the year to 31 December 2013. Carla has filed it with the comment that it is "to be dealt with when all other information for inclusion in the company's annual report is available".

REQUIRED:

1. Critically comment on the implications of these findings for Signet's quality control policies and procedures. (35 marks)

Audit recommendations are useful for management to make decision. Discuss the attributes for audit recommendations in an internal audit report. (15 marks)