Memorandum

To: From: Date: Re:

Apollo Management

4/2/2012 SAS99 Planning Memo

The SAS 99 memo, Consideration of Fraud in a Financial Statement Audit, will bring out information of possible fraud schemes that are affecting the financial statements and procedures in order to work with the controls and correct the matters found. In reviewing the audit procedures for Apollo there seem to be some red flags that need to be reviewed more carefully to expose possible fraud schemes. There is no access to the prior year work papers for the audit conducted by Smith and Smith, CPAs who declined to do the audit for this year. There is no word from the client on why the CPA will not work with them. The notes to the Form 10K and related financials contain information on a related-party transaction in which an operating facility and equipment were purchased from a company controlled by two previous directors and a shareholder of Apollo for $623,905.92. The Board meeting of June 30, 2007 indicates that Apollo made an advance of $1,000,000 to Mr. Lancaster and it would be recorded as other receivables instead of employee advances. The Board meeting of January 3, 2008 refers to Mr. Baker inquiring about equipment purchased in 2006 that has not been set up yet.

LT-B