Smith Manufacturing\'s Bank has just informed the company\'s CFO that an audit i

Question

Smith Manufacturing's Bank has just informed the company's CFO that an audit is required to obtain an operating line of credit(LOC). The company needs the LOC to maintain its cas flow. Mr. Jones has contacted you to see if your firm is will to perform an audit.

Prepare a memo to Mr. Jones that addresses any concerns you may have regarding the audit. Consider whether your firm can complete the audit or whether it is a conflict of interest.

In addition, Mr. Jones is unfamiliar with the standard unqualified audit opinion report. He has asked that you provide a copy of what the opinion would look like.

Prepare a sample draft of a standard unqualified audit opinion as an attachment to your memo. Make sure you inclue a clause that the opinion is a "Sample Only" and not to be used for any other purpose.

Explanation / Answer

Line of credit is a flexible loan from a bank or financial institution to an individual or business.

By and large, lines of credit are not intended to be used to fund single one-time purchases such as houses or cars - that is what mortgages and auto loans are for – though lines of credit can be used to acquire items for which a bank might not normally underwrite a loan.

The banks or financial institutions shall before approving the loan assess the credibility of the borrower.

The verification requirements include the following:

Credit rating agency provides information of the following:

Information to be verified is as follows:

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