2-5-a Oceanview Marine Company Identification of Significant Risks of Material Misstatement December 31, 2018 Account: Sales Current Unadjusted Balance: $ 26,456,647 Prior Year's Audited Balance: $ 22,889,000 Nature of potential material misstatement: Potential overstatement of sales due to: 1) Fictitious sales recorded in 2018 2) Cutoff errors (2019 sales recorded in 2018) Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Yes. Increase in revenue is significant and auditing standards require identifying revenue recognition as a fraud risk. Audit procedure to be performed to address identified risk (be specific): 1) Review sales recorded near year end, including confirmation of accounts receivable for any special terms. 2) Increase extent of cutoff testing to determine whether any sales which occurred in January 2019 were record in December 2018. Account: Current Unadjusted Balance: Prior Year's Audited Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Current workpapers --audit planning + Page 11 2-5-6 Oceanview Marine Company Identification of Significant Risks of Material Misstatement (continued) December 31, 2018 Account: Current Unadjusted Balance: Prior Year's Audited Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. - - Audit procedure to be performed to address identified risk (be specific): Account: Current Unadjusted Balance: Prior Year's Audited Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Current worlananove audit lani LDA 2-5-a Oceanview Marine Company Identification of Significant Risks of Material Misstatement December 31, 2018 Account: Sales Current Unadjusted Balance: $ 26,456,647 Prior Year's Audited Balance: $ 22,889,000 Nature of potential material misstatement: Potential overstatement of sales due to: 1) Fictitious sales recorded in 2018 2) Cutoff errors (2019 sales recorded in 2018) Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Yes. Increase in revenue is significant and auditing standards require identifying revenue recognition as a fraud risk. Audit procedure to be performed to address identified risk (be specific): 1) Review sales recorded near year end, including confirmation of accounts receivable for any special terms. 2) Increase extent of cutoff testing to determine whether any sales which occurred in January 2019 were record in December 2018. Account: Current Unadjusted Balance: Prior Year's Audited Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Current workpapers --audit planning + Page 11 2-5-6 Oceanview Marine Company Identification of Significant Risks of Material Misstatement (continued) December 31, 2018 Account: Current Unadjusted Balance: Prior Year's Audited Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. - - Audit procedure to be performed to address identified risk (be specific): Account: Current Unadjusted Balance: Prior Year's Audited Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Current worlananove audit lani LDA