ToadyCom Is a New Public Phone and Internet Company Heavily

question 18

Essay

Toady.com is a new public phone and internet company heavily financed by the Eastpac Bank. During your audit of Toady.com you have found that the business is in the practice of signing up new customers with very little in the way of credit checks. You are concerned that the disclosure of bad and doubtful debts may not accurately reflect the true situation of the company. You notice that if you apply the standards correctly the bad and doubtful debts will have such an effect on the financial statements that capital adequacy requirements may be breached.
When you approached management about the adequacy of these disclosures they told you that they were happy with the bad and doubtful debts at their current level, and that they would not be changing their method of application of the standard.
What is your first obligation? What type of auditor's report will you issue, and why?

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Definitions:

Total Metabolic Rate

The total amount of energy expended by an organism in a given time period to maintain all bodily functions while at rest.

Basal Metabolic Rate

The rate at which the body uses energy while at rest to maintain vital functions such as breathing and keeping warm.

Body Mass Index

A measure of body fat based on height and weight that applies to adult men and women, used to classify underweight, normal weight, overweight, and obesity.

Metabolic Rate

Metabolic Rate is the rate at which an organism's body consumes energy, crucial for determining the amount of food energy it needs to maintain its body functions.