Auditing & Assurance Services 6th Edition by Timothy Louwers

Exercise 69

Reports on Internal Control over Financial Reporting (Identify Report Deficiencies). Sorrell, CPA, is auditing the financial statements of Van Dyke as of December 31, 2014. Sorrell's substantive procedures and other tests indicated that Van Dyke's financial statements were prepared in accordance with generally accepted accounting principles and, accordingly, Sorrell expressed an unqualified opinion on those financial statements. Because Van Dyke's securities are registered with the Securities and Exchange Commission, Van Dyke is subject to the reporting requirements of AS 5. During its assessment of internal control over financial reporting, Van Dyke's management identified material weaknesses related to (1) the method of accounting for sales commissions and (2) separation of duties related to purchase transactions. Sorrell was able to gather sufficient evidence and did not encounter any limitations with respect to the evaluation of Van Dyke's internal control over financial reporting. Sorrell prepared the following draft report on Van Dyke's internal control over financial reporting:
Required:
Identify the deficiencies in the audit report drafted by Sorrell. Group the deficiencies by paragraph and in the order in which they appear. Do not rewrite the report. Cite the relevant sections from the professional standards.