The “Accounts Receivable—Confirmation Statistics” working paper shown on the next page was prepared by an audit assistant for the 2018 audit of Lewis County Water Company, Inc., a continuing audit client. The engagement supervisor is reviewing the working papers. 

Required: 

Describe the deficiencies in the working paper that the engagement supervisor should discover. Assume that the accounts were selected for confirmation on the basis of a sample that was properly planned and documented on the working paper. 

LEWIS COUNTY WATER CO., INC. Accounts Receivable-Confirmation Statistics Index B-3 12/31/18 Dollars Accounts Amount Number Percent Percent Confirmation requests sent: $ 260,000 20,000 $ 280,000 Positives 54 2.7% 13.0% Negatives . Total sent... 140 194 7.0 1.0 14.0 9.7 Accounts selected/client asked us not to confirm. 0.3 10.0 Total selected for testing . Total accounts receivable at 12/31/18, confirm date.. 200 $2,000,000/* 2,000 100.0 100.0 Results: Replies received through 2/25/19: Positives-no exception. Negatives-did not reply or replied no exception". Total confirmed without exception.. $ 180,000 16,000 $ 196,000 44C 2.2 9.0 0.8 120C 6.0 164 8.2 9.8 Differences reported and resolved, no adjustment: $ 30,000 2,000 $ 32,000 Positives. 12 0.3 1.5 Negatives Total 0.6 0.1 18 0.9 1.6 Differences found to be potential adjustments: $ 10,000 2,000 $ 12,000 Positives 2CX 0.1 0.5 Negatives . Total 0.6% adjustment, immaterial. 8CX 0.4 0.1 0.5 10 0.6 Accounts selected/client asked us not to confirm. 6 0.3 Tick Mark Legend = Agreed to accounts receivable subsidiary ledger. = Agreed to general ledger and lead schedule. = Includes one related-party transaction. = Confirmed without exception, W/P B-4. = Confirmed with exception, W/P B-5. CX Conclusion: The potential adjustment of $12,000, or 0.6%, is below the materiality threshold; therefore, the accounts receivable balance is fairly stated.