Discussion Question
What do you do? You are a new partner at a CPA firm and your audit staff is running behind schedule. Your audit manager assures you that the work will be completed on time to issue the report as scheduled but mentions that there are some concerns regarding internal controls of cash balances. The manager also indicates that a significant amount of cash has not been confirmed yet. The client is presently in breach of its debt covenants and is renegotiating its debt agreement. You have a meeting with the CFO and Controller today to discuss the audit report.
The management team wants assurance that they will receive an unqualified report. Debt negotiations are dependent upon receiving this type of audit report. How do you respond?
What internal procedures, if any, must you follow at your firm to complete the audit report?