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  3. taces imports a number of pharmaceutical products.

TACES imports a number of pharmaceutical products. In order to hedge its foreign currency transactions,...

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Accounting

TACES imports a number of pharmaceutical products. In order to hedge its foreign currency transactions, TACES entered into a number of forward rate agreements this year. Prior to this time TACES had had little exposure to derivative instruments, but a series of bad experiences resulting from fluctuating exchange rates convinced the company that a hedging strategy was necessary. During planning for the audit of TACES , the companys hedging arrangements were identified as inherently risky and increased testing was carried out in this area. A number of small errors were noted in accounting for hedge transactions, but there did not appear to be any material errors and as such no adjustments were made. A review of the audit file suggests that the errors noted were a result of inexperience and poor controls in the area. While all of the errors were brought to the attention of the treasurer, who is responsible for the companys hedging strategy, no further action has been taken to date.

- What further action should the auditor take in response to the errors and control weaknesses identified? Justify your response.

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