You are a former certified education administrator who departed your former position to become the owner of a small, in-home day care consisting of you and a part-time assistant where you care for children from age three (3) to age ten (10). Over the course of time, your demographic population has increased due to significant business growth that has resulted in many families relocating to your area. With more businesses projected to move to the area and the building of new housing developments, it is projected that this growth could be long term.You have decided that this is a good opportunity to expand your day care business as you have received many inquiries for childcare. In order to comply with your home state regulations, you will require a larger facility and will need to hire additional staff in order to sustain the larger demand for day care. This staff will consist of five (5) Certified Day Care Professionals, one (1) Registered Nurse Professional, five (5) After-School Assistants and one (1) Office Support Paraprofessional. You have secured approval for a bank loan and qualify for future loans for future expansion if your current endeavor is successful. Meanwhile, the state in which you operate has requested that you provide a staffing plan before it will issue licensure for your expanded capacity.

1. According to PCAOB Auditing Standard (AS 2201) (https://pcaobus.org/Standards/Auditing/Pages/AS2201.aspx), what factors should auditors consider when evaluating the severity of a deficiency in a control that directly addresses a risk of material misstatement? 2. PCAOB AS 2201 distinguishes the difference between a deficiency in design and a deficiency in operation. Does the Assistant Controller’s failure to adequately review the Vendor Change Form represent a deficiency in the design or operating effectiveness of the control? 3. Based on guidance in AS 2201, determine if the failure in the vendor request change form control indicative of a material weakness in internal control over financial reporting. 4. SEC Regulation S-K requires that management provide a report on a registrant’s ICFR in the company’s Form 10-K. Assuming the company and the auditor concluded that this internal control failure indicates a material weakness in internal control, what information would the company be expected to disclose? 5. In light of the identified deficiency, auditors should consider a possibility that the deficiency may have an impact on other controls, and/or the similar problem may exist in other controls. What implications does the failure to adequately review the Vendor Change Form have on other controls?

This week you’re learning some of the characteristics that will help you practice your relationship building skill (trust, mutual respect, mindfulness, diversity and inclusion, and open communication). Discuss how you are applying at least one of these characteristics in your life right now at home, work, or school.Remember to answer each part of the question in 2 paragraphs. Each paragraph should be 5-7 sentences with limited grammatical errors (total 10-14 sentences). Also, respond to at least 1 of your peers (at least 1-2 sentences).