Information Relevant to 2011 Audit Audit Action Recommended Pressure to meet sales targets GA 3-1 Increase procedures related to existence of sales and valuation of receivables, as well as cutoff Purchase of equipment GA 3-1 Verify through invoices and receiving reports if equipment purchased during the year Verify terms of refinancing for accuracy as well as interest payments. Line of credit refinanced GA 3-1 Did they pay note on Jan. 1, 2012 or refinance further? May need to disclose as subsequent event if refinanced again, or consider impact on going concern if note was not paid as required Declaration of dividends for the previous year GA 3-1Verify that only approved dividends were paid (i.e. no dividend payments made) Salary increase and stipends approved and seconded by non-independent board members GA 3-1Verify the charter by-laws, appears to conflict of interest Commercial time expense increased 10% from previous year GA 3-1Verify through invoices and payments Damages reported GA 3-2 Verify valuation of damages, as well as check for disclosure if economic loss How does this impact going concern? Prices increased to compensate decreased sales GA 3-2 What is the impact on sales since the price increase? GA 3-a
R&D expense eliminated for year GA 3-2 Verify that R&D decreased accordingly Lab modified to house gym GA 3-2 Verify the costs of modification through invoices, as well as verify how it was recorded-expensed or capitalized Scientists reassigned to maintenance GA 3-2 Were the salaries adjusted to reflect the change in job? Postage and telephone expenses reduced during year GA 3-2 Verify that there was a reduction in postage and telephone expense AR write-off for one account ($8,810.13) GA 3-2 Low number of write-off for company of this size, and undue pressure to avoid write-offs Increase testing related to valuation of AR
Loan to Mr. Lancaster’s personal secretary for 1M GA 3-2...