Case Scenario:
Person R is the sole shareholder of Company A, which provides spray foam insulation to residential and commercial markets. Company A's head office is located in Edmonton, Alberta and the company has additional locations in Calgary and Vancouver. Company A has been very successful in their first ten years of operations, and is now planning to expand further, into Saskatchewan and Manitoba. The company has approached its bank for additional financing; as a result, the bank is requiring audited financial statements.
P&L Associate was recently engaged as the auditor for Company A. In the past, the company's financial statements were reviewed by a local accountant. The P&L partner responsible for the file has already dealt with all client acceptance issues.
It is January 30, 2022, and you, P&L Associate, and Manager C, P&L Manager, are at Company A's head office, meeting with Person R and with Person S, the assistant controller.
Person R:
I focus on supervising the spray foam technicians and on securing new contracts, and leave the accounting and finances up to Person L, our controller. Person L joined us in late 2020, after working for many years as an accounting clerk in the construction industry. Person L has been doing a wonderful job, so, for the 2021 fiscal year, I approved a new compensation package that she proposed. In addition to a base salary, Person L now receives a bonus, which is based on 10% of Company A' net income before tax. Person L was unable to attend this meeting as she is in the hospital with a broken leg, so Person S has offered to help with the audit while she is away.
I also had Person S prepare some notes on our sales, receivable, and receipts cycle (Exhibit I). Person L made some changes to our process over the past year and we just want to ensure everything is set up properly. Can you review this information and let us know if there are any areas needing improvement?
Manager C:
Certainly, we will take a look and get back you.
Required: A memo containing the information requested by Person R above.
(Hint: you should aim to discuss a minimum of 3 issues)