January 6, 2015
Dear Mrs. Wardlaw:
I first wanted to thank you for congratulating me on my recent promotion; I look forward to working with you on the new Apollo Shoes engagement. I have read all the information you sent me about Apollo Shoes to gain a better understanding of the company, and I feel like I have a firm grasp of the company structure and environment. After reviewing the company’s last three board of directors meetings, I determined what expertise would be necessary to carry out the audit on Apollo Shoes. If you can assign these staff to our audit team, the productivity and effectiveness of the audit will increase significantly. The first staff member that would be greatly helpful to our audit team would be an information technology specialist. In the board meeting held on June 30, the board authorized up to $1.2 million for the purchase and installation of a new information system. However, to fund the purchase and pay other expenses, the board authorized a draw of over $44 million, which seems very excessive. Having an IT specialist will help us determine the total cost of installing a new information system and bring light to why the board drew over $44 million to fund the purchase. Another staff member that would be helpful to our audit team would be a property, plant, and equipment specialist. Despite authorizing the purchase of equipment totaling $1.3 million in January of 2014, the equipment was still not set up during the January 2015 board meeting. A property, plant, and equipment specialist could help us determine the accounting implications of purchasing the equipment in 2014 and still not having it set up in 2015, as far as depreciation and cost recognition are concerned. Quite possibly the most important staff member that we will need on our audit team is a lawyer or legal expert, for a variety of different situations. The first and most glaring situation that will need to be addressed is the board advancing $1,250,000...
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