Aquatic Jet Products, Inc. is a manufacturer of jet boats and personal watercraft, with headquarters in northern Florida. Personal watercraft are manufactured at the Florida facility. The company's jet boats are manufactured at a facility in Mexico. Finished goods are sold primarily to independent marine stores throughout the United States.

As part of the fieldwork on this engagement, the auditor obtained and documented an understanding of the company's internal controls relating to accounts receivable and assessed control risk related to accounts receivable at the maximum level. Susan, the staff person assigned to the engagement, requested and obtained from the company an aged accounts receivable schedule listing the total amount owed by each customer as of December 31, year 2, and sent positive confirmation requests to a sample of the company customers. This is the second year that the company has engaged your firm to perform the annual audit of its financial statements.

Review Susan's comments on the following confirmation and determine the best conclusion and/or follow-up procedure. Assume that the confirmation was appropriately signed, unless otherwise noted.

Confirmation from Performance Marine Sales, Inc.

February 1, year 3

Performance Marine Sales, Inc. 1284 River Road Louisville, Kentucky 40059

Re: Balance at December 31, year 2 - $267,000

Dear Sirs:

As of December 31, year 2, our records indicate your balance with our company as the amount listed above. Please complete and sign the bottom portion of this letter and return the entire letter to our auditors, JS LLP, P. O. Box 100, Orlando, Florida 32806.

A stamped, self-addressed envelope is enclosed for your convenience.

Sincerely,

_____________________________ Aquatic Jet Products, Inc.

........................................................................................................................

The above balance is _____Correct

The above balance is__X__ Incorrect (show amount) $325,000

If incorrect, please provide information that could help to reconcile your account

Response: We placed an order for $58,000 on December 26, year 2.

Signature:________________________________Title:________________________Date:__________

Susan's note to file:

Per discussion with the controller, the order for $58,000 was shipped f.o.b. shipping point on December 30, year 2, and was received by the customer on January 3, year 3. Therefore, no entry has been made to record the sale in year 2.

Select the procedure that should be followed to clear the exception, if one exists.

Customer	Conclusion/procedure
Performance Marine Sales, Inc.