Accounts Receivable

• Complete steps 1-4 of the Accounts Receivable Audit program (below).
• You must indicate on the working papers the procedures you completed.Use tic marks to indicate the specific audit steps performed.
• Include a tic mark legend on each working paper.
• Indicate the preparer on the working paper.
• Step #4 really involves audit judgment. (Include your reasoning in making your judgment.)
• When analyzing the Allowance for Doubtful Accounts and Bad Debt Expense Accounts it is helpful to use T-accounts.Make sure you label each entry affecting the accounts and show supporting computations.

Show any analysis and label.

Make sure you index each document/working paper.Also cross-reference information from one document to another.

Audit Procedures Audit Objectives W/PRef. Initials Comments

Accounts Receivable

1.Obtain an aged trial balance of individual customer accounts. Recalculate the total and trace to the general ledger control account.

2.Review the aging for large and unusual items.

3.Send confirmations to all accounts over $X. Select a random sample of all remaining accounts for confirmation.

a.Investigate exceptions reported by customers.

b.Perform alternative procedures on accounts that do not respond to positive confirmation requests.

i.Vouch cash receipts after the confirmation date for subsequent payment.

ii.Vouch sales invoices and shipping documents.

4.Evaluate the adequacy of the allowance for doubtful accounts.

a.Vouch a sample of current amounts in aged trial balance to sales invoices to determine whether

amounts aged current should be aged past due.

b.Compare the current-year write-off experience to the prior-year allowance.

c.Vouch cash receipts after the balance sheet date for collections on past-due accounts.

d.Obtain financial statements or credit reports and discuss with the credit manager collections on large

past-due accounts.

e.Calculate an allowance estimate using prior relations of write-offs and sales, taking under consideration

current economic events.

We received a number of account receivable (and one pre-paid insurance) confirmations that I put on your desk when I stopped by to talk to Samuel Carboy this morning.With the good response rate on the positive confirmations, you can probably start working on A/R now.

While I think of it, you need to construct a memo (C-2-1) addressing the following issues:

1. Describe the two forms of accounts receivable confirmation requests that you used and indicate the factors that you considered in determining which type to use.
2. What "alternative procedures" are you going to use to verify the existence of these accounts and the gross value of the receivables if the customers who receive positive confirmations never reply, even to a second request?

Put the confirmations in the workpapers (C-2-2, C-2-3, C-2-4, etc.).Address any discrepancies between the client and the customer and propose adjustments as necessary.

It would also be helpful to indicate the payments received by Apollo on the Aged Trial Balance Schedule (C-2).You can get these off of any early January deposits slips.If you get copies from the client, be sure to tie the totals into deposits indicated on the cutoff bank statement received directly from the bank.

Lastly, the allowance for doubtful accounts looks pretty low.A/R goes up, but the allowance goes down?I need a separate workpaper (C-3) addressing the reasonableness of Apollo's Allowance for Doubtful Accounts.You can specifically identify troubled accounts, look at subsequent cash collections, look at what Apollo's competitors do, look at what Apollo has done in the past (bad debt expense as a % of sales, allowance for doubtful accounts as a % of total receivables) to develop your estimate of what should be in the allowance.Also consider current and previous A/R Turnover and Days' Sales in A/R ratios.

DW

Apollo Shoes, Inc.

Shoetown, ME

Neutralizer

1359 Central Boulevard

Derma, MS39530

Attn: Accounts Payable Dept.

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$3,051,755.48

Purchases from Apollo Shoes during the year 2014 totaled

$3,051,755.48

This balance is correct except as noted below:

Our records indicate that we owe $1388.75 more than indicated above.We wrote a check to Apollo on 12/28 for $3,053,144.23 for 10 pallets of shoes.

Date:1/20/2015 By: __Rudy Robinson______________________

Title: _Accounts Payable______________

Apollo Shoes, Inc.

Shoetown, ME

Mall-Warts

146 Boardwalk Drive

Atlantic City, NJ 08401

Attn: Accounts Payable Dept.

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$20,549,225.88

Purchases from Apollo Shoes during the year 2014 totaled

$122,826,158.60

These amounts are correct except as noted below:

The amounts appear right, but we entered into involuntary bankruptcy on November 3. We told Apollo about this back at that time.We don't know why they shipped us so many pairs in late December (including over 1600 pairs of size 23's that we can't even give away!)!We didn't order them and we can't afford to send them back!

Date:1/14/2015By: __Action Jackson____________

Title: _Liquidation Coordinator______

Apollo Shoes, Inc.

Shoetown, ME

Run for Your Life Shoes

Attn: Accounts Payable Dept.

5110 Speedway Drive

Los Angeles, CA90035

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$2,165,500.55

Purchases from Apollo Shoes during the year 2014 totaled

$2,165,500.55

This balance is correct except as noted below:

Yes, we made one purchase from Apollo during the year, but we paid the entire amount on 1/8.

Date: 1/14/2015By: __Justin Thompson_____________________

Title: _Accounts Payable Coordinator___________

Apollo Shoes, Inc.

Shoetown, ME

Tread

Attn: Accounts Payable Dept.

Highway 67

French Lick, IN 47432

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND COMPARE THEM TO YOUR RECORDS OF YOUR ACCOUNT WITH US.IF THE INFORMATION IS NOT IN AGREEMENT WITH YOUR RECORDS, PLEASE STATE ANY DIFFERENCES BELOW AND RETURN DIRECTLY TO OUR AUDITORS IN THE RETURN ENVELOPE PROVIDED.IF THE INFORMATION IS CORRECT, NO REPLY IS NECESSARY.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$1,388.75

Purchases from Apollo Shoes during the year 2014 totaled

$3,091,017.74

This balance is correct except as noted below:

We were told in November that our account had already been credited for the amount listed above for a return of 5 pairs of defective shoes.Total purchases agree with our records though.

Date: __1/14/2015By: __Shoeless Joe Johanson____

Title: _President, Tread Shoes___

Apollo Shoes, Inc.

Shoetown, ME

Paul Bunion Footwear

Attn: Accounts Payable Dept.

Lone Mountain Trail

P.O. Box 10558

Big Sky, MT 59717

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$11,558,847.58

Purchases from Apollo Shoes during the year 2014 totaled

$29,270,632.63

This balance is correct except as noted below:

No problems noted.

Date: 1/21/2015By: __Kevin Bunion_______________________

Title: _VP-Finance, PBS______________

Apollo Shoes, Inc.

Shoetown, ME

Sassy Shoes

Attn: Accounts Payable Dept.

440 W. 53^rd Street

New York, NY 10018

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$6,400,081.85

Purchases from Apollo Shoes during the year 2014 totaled

$15,178,041.85

This balance is correct except as noted below:

Yes, we owed it. This is the third letter that we've received from you people!!!Our sales are just running a little slowly this year, but we paid on the tenth, so quit hassling us!

Date: __1/22/2015_______________ By: __Sassy Spinelli______________

Title: _Founder, Sassy Shoes_______

Apollo Shoes, Inc.

Shoetown, ME

International Soccer Federation

Attn: Accounts Payable Dept.

Birmingham Road

Stratford-upon-Avon

Warwickshire CV34 6LT

England

Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements.Part of this audit includes direct verification of customer balances.

PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE.

This is not a request for payment.Please do not send your remittance to our auditors.

Your prompt attention to this request will be appreciated.

Samuel Carboy

______________________

Samuel Carboy, Controller

The balance due Apollo Shoes as of December 31, 2014, is

$1,222,359.56

Purchases from Apollo Shoes during the year 2014 totaled

$3,228,779.92

This balance is correct except as noted below:

The amounts are correct as stated.I don't think we are going to buy any more though.The sirens keep going off prematurely and it's causing our fans to riot.

Date: 1/21/2015By: __Foots McKinney____________________

Title: _Equipment Manager, ISF _____________

Apollo Shoes, Inc. C-1 Accounts Receivable Lead Schedule Prepared by For Year Ended 12/31/2014 Reviewed by PBC (Audited) Credits/ Unaudited Balance Receipts/ Balance Acct # Account Title 12/31/2013 Additions Writeoffs 12/31/2014 11000 Accounts Receivable $16,410,902.71 $231,613,231.99 $196,508,874.72 $51,515,259.98 11100 Advances to Employees $0.00 $0.00 $0.00 $0.00 11400 Other Receivables $0.00 $1,250,000.00 $0.00 $1,250,000.00 11500 Allowance for Doubtful Accounts ($1,262,819.88) $0.00 ($23,810.13) ($1,239,009.75) $15,148,082.83 $232,863,231.99 $196,485,064.59 $51,526,250.23

Apollo Shoes, Inc. C-2 Accounts Receivable Aged Trial Balance Prepared by For Year Ended 12/31/2014 Reviewed by 2014 Conf Date Date Current Past Due 2015 Payments Net Sales Total Balance Type Mailed Received <30 days 30-60 60-90>90 Days Received Pay More Shoes $586,779.54 $526,004.85 $526,004.85 Nuke Me $1,847,819.03 $35,028.59 $35,028.59 Run For Your Life Shoes $2,165,500.55 $2,165,500.55 $2,165,500.55 Shoe Shack $3,013,152.09 $730,588.25 $730,588.25 Tread $3,091,017.74 $1,388.75 $1,388.75 Mall-Wart $122,826,158.60 $20,549,225.88 $5,765,081.85 $14,784,144.03 Wall of Shoes $3,315,585.60 $9,582.25 $9,582.25 Trenchfoot $3,325,046.93 $85,534.25 $85,534.25 Shack's Shoe Shine $3,017,205.21 $4,952.77 $4,952.77 Imelda's Closet $2,942,005.95 $96,452.11 $96,452.11 Hip Hop Shoes $695,542.21 $695,542.21 $695,542.21 International Soccer Federation $3,228,779.92 $1,222,359.56 $1,222,359.56 Eight East $3,173,304.14 $45,258.22 $45,258.22 Company B $1,063,564.85 $63,258.65 $63,258.65 Feet Lamour $1,151,561.90 $385,241.02 $385,241.02 Walk About $3,015,119.00 $932,653.33 $932,653.33 Neutralizer $3,051,755.48 $3,051,755.48 ($1,388.75) $3,053,144.23 Doug's Shoes $3,211,903.23 $2,648.75 $2,648.75 Custom Shoes $575,619.27 $5,996.13 $5,996.13 Blue Bird Shoes $271,531.15 $11,844.63 $11,844.63 Bad Boy Shoes $435,286.26 $400,253.31 $400,253.31 Pump It Up Shoes $497,899.04 $3,375.54 $3,375.54 Hop Scotch Shoes $2,779,399.08 $895,606.23 $895,606.23 Sassy Shoes $15,178,041.85 $6,400,081.85 $6,400,081.85 Wild Hair Shoes $454,774.74 $252,769.24 $252,769.24 Evil Spirit Shoes $2,109,522.15 $86,450.60 $86,450.60 Action Foot Shoes $1,812,668.55 $793,544.22 $793,544.22 Big Bob's Shoe Store $3,105,982.56 $399,011.82 $399,011.82 Paul Bunion Footware $29,270,632.63 $11,558,847.58 $11,558,847.58 Lock-Up Shoe Store $1,499,730.29 $104,503.36 $104,503.36 Other Customers $8,900,342.45 $0.00 Total $231,613,231.99 $51,515,259.98 $24,311,090.52 $4,908,691.85 $7,448,074.93 $14,847,402.68