Question
Accounts Receivable and MUS Sampling The following information is available for your audit client, Addison Corporation: Accounts Receivable at 12/31/2022 - $10,235,457 944 accounts. This
Accounts Receivable and MUS Sampling The following information is available for your audit client, Addison Corporation: Accounts Receivable at 12/31/2022 - $10,235,457 944 accounts. This balance is on the Receivable lead schedule with the work paper number A-6 Tolerable Misstatement: $150,000 Expected Misstatement: $20,000 Risk of incorrect acceptance: 5% Confirmation replies: 1. The balance of $140,000 is incorrect because we paid that amount in full on December 31, 2022. Follow-up: An analysis of the cash receipts journal revealed that the check had been received in the mail on January 9, 2023. 2. Of the balance of $30,000, $1,200 is incorrect because on December 19 we returned a printer when we found that we didnt need it. We ordered it in the middle of November when we had anticipated a need for it. When we received the printer, we realized it was unnecessary and returned it unopened. Follow-up: An analysis of the transaction revealed that it was received by your client prior to December 31, 2022 but they have not yet processed the credit. 3. The balance of $214,000 is correct, and we paid it on January 5, 2023. Follow-up: An analysis of the cash receipts journal revealed that the check had been received on January 10, 2023. 4. Of the balance of $130,000, $8,000 is incorrect because it represents goods that we didnt receive until January 5, 2023. Follow-up: Inspection of shipping records reveals that the item was shipped on January 3, 2023. 5. Of the accounts $18,000 balance, we only owe $17,460 because salesperson gave us special 3% discount. Follow-up: Inspection of file indicates that salesperson did give a special discount. Christopher Reeves, controller, and Lucille Godd, President, indicated that the special discount granted was not appropriate or normal but the salesperson did tell this customer they would be given this discount.. 6. The statement of our account showing a balance of $24,000 due Addison Corporation at December 31, 2022 may be correct in the future but we have not yet sold the merchandise. We received $24,000 worth of goods from Addison Corporation on consignment on 12/15/2022. Follow-up: Inspection of agreement indicates that goods were shipped on consignment and title transfers when the goods are sold by the consignee. Required: Prepare work paper(s) that documents the book values and the audited values for each returned confirmation. Be sure to include statement from the confirmation and the evidence that you noted after the confirmation was returned. Prepare a proper workpaper that documents the sample size and the sampling interval for selecting accounts to confirm. Determine if the accounts receivable balance is fairly stated based on MUS sampling. Workpaper should include a proper conclusion.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started