Oakdale, inc, is a subsidiary of Solomon publishing and specializes in the publication and distribution of reference books. Oakdale’s sales for the past year exceeded 18 million, and the company employed an average of 65 employees. Solomon periodically sends a member of its internal audit department to audit the operations of each of its subsidiaries, and Katherine Ford, Oakdale’s treasurer, is currently working with Ralph Johnson of Solomon’s internal audit staff. Johnson has just completed a review of Oakdale’s investment cycle and prepared the following report.