Qualified Audit Report Bad News Letter
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Aarons & Skinner, LLP
Certified Public Accountants
1234 Lane Road County
Some Where, Some State 99636
February 21, 2012
William Dalton, President
Dalton Enterprises, Inc.
7894 Place Avenue Circle Way
Some Where, Some State 96418
Dear William Dalton:
As requested, I am writing to inform you of a recent problem in the audit of Dalton Enterprises, Inc. The audit team was notified by your accounting department that multiple credit slips used to verify travel and entertainment (T&E) expenses were not submitted. This lack of documentation is a scope limitation in the audit of the T&E Account.
A scope limitation occurs when we have no evidence to test, (in your case we have insufficient credit slips which document the entries made in your T&E account) thus preventing us from determining whether an account is misstated. Due to the possibility of misstatement, we must qualify the audit report to notify financial statement users of the problem and their inability to rely on the information you have provided.
A qualified audit report may negatively affect Dalton Enterprises, Inc.s ability to go public in the future. However, the scope limitation can be corrected if you provide us with the missing credit slips for the T&E expenses. When we receive this documentation we can appropriately test the account and, having found no other areas of concern during the audit, remove the qualification on the audit report.
I hope that we can resolve this problem as quickly as possible so the audit can be completed on time and under budget. We would like to keep you as a client, and wish to resolve this problem without causing further issues. If you have questions or would like to discuss the situation further, please contact me at 777-341-5643 or [email protected].
Sincerely,
Some Person
Senior In-Charge