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Floral Impressions Ltd. (FIL)

You, CPA, are employed at Beaulieu & Beauregard, Chartered Professional Accountants. On November 20, 2013, Dominic Jones, a partner in your firm, sends you the following e-mail: Our firm has been reappointed auditors of Floral Impressions Ltd. (FIL) for the year ending December 31, 2013. I met with the president and major shareholder of FIL, Liz Holtby, last week, and I toured the Vancouver warehouse and head office. I have prepared some background information on FIL for you to review, including the companys October 31, 2013 internal non-consolidated financial statements (Exhibit I). FIL is increasing the amount of business it does on the Internet, and Liz would like us to provide comments on the direction in which FIL is moving. I made notes on her plans for FILs increasing use of the Internet (Exhibit II). I also met with Craig Albertson, the controller, and I made notes from that meeting (Exhibit III). Once you have reviewed the material, I would like you to draft an audit planning memo identifying the new accounting and audit issues for the 2013 audit. I would also like the memo to address Lizs specific requests. Id like to receive something by next week. Let me know if you have any questions.

EXHIBIT I BACKGROUND INFORMATION

FIL, a small public company, listed on a Canadian stock exchange, is a wholesaler of silk plants with three warehouses located in Ontario, Alberta, and British Columbia. It imports its inventory of silk flowers and accessories from Indonesia. FIL employees arrange bouquets, trees, wreaths, and decorative floral products for sale in Canada to flower shops, grocery stores, and other retailers. The silk-plant concept was novel when FIL was incorporated in 1992. For the first three fiscal years, sales grew at approximately 40% per year, and FIL expanded to meet the demand. However, increased competition resulted in declining sales and operating losses over the next six years. Liz inherited the shares of the company in 2011. She had just completed a marketing course and was very excited about becoming involved in the business and applying her new skills. The fiscal year ended December 31, 2012, brought a return to higher sales levels and a modest net income. Lizs management contract, which was renegotiated in 2012, provides for stock options to be granted to her each year based on the percentage increase of FILs revenue from one year to the next. On October 31, 2013, Liz was granted stock options for the first time. She received 4,500 stock options at $2.25 each, the market price on that date. On January 15, 2013, when shares were trading at $4 each, FIL announced an agreement with the shareholders of Rest-EZE Wreath Corporation (RWC) whereby FIL would acquire 100% of the voting shares of RWC by issuing 200,000 FIL common shares. The acquisition of RWC was completed on October 31, 2013. The market value of FILs shares has declined significantly since the announcement. RWC, a small private Canadian corporation, sells funeral wreaths, made with fresh flowers, on the Internet. The suppliers, florists throughout Canada, advertise their wreath models on RWCs website, which is targeted at funeral homes and their customers. These clients order their flowers through RWCs website. RWC records 100% of the sale, invoices the clients for the same amount, and remits 85% of the proceeds to the supplier. RWC absorbs any bad debts. RWC is in the process of installing a billing system on its website that would allow customers to pay by credit card, but is still working out some bugs. RWCs assets (mainly accounts receivable and office equipment) less the liabilities assumed have a fair value of $150,000, as established by an independent evaluator. RWC has never been audited and its year end is November 30.

EXHIBIT I (continued)

FLORAL IMPRESSIONS LTD.

NON-CONSOLIDATED BALANCE SHEET As at (in thousands of dollars)

October 31, 2013 December 31, 2012

(unaudited) (audited)

Assets

Current assets

Accounts receivable $ 2,003 $ 1,610

Inventory 610 420

2,613 2,030

Property, plant and equipment 216 239

Computer development costs 32 22

Intangiblescustomers list 20

$ 2,881 $ 2,291

Liabilities

Current liabilities

Bank indebtedness $ 1,850 $ 1,520

Accounts payable 1,253 1,199

3,103 2,719

Shareholders deficiency

Common shares (2013: 600,000; 2012: 400,000) 400 400

Deficit (622) (828)

(222) (428)

$ 2,881 $ 2,291

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