Auditing
The following items were discovered during the December 31, 2019 audit of the financial statements of Wionna Corporation: i (Click the icon to view the items.) Requirements a. Prepare an Unadjusted Misstatement Audit Schedule. b. Balance sheet and income statement materiality for the audit of Wionna financial statements is $100,000. What is your conclusion about the financial statements if the audit findings are not corrected by Wionna management before you issue the audit report? More Info X 1. The company's financial statements did not include an accrual for bonuses earned by senior management in 2019 but payable in March 2020. The aggregate bonus amount was $250,000. 2. Equipment originally costing $550,000 that was fully depreciated with a remaining residual value of $100,000 was sold for $125,000 on December 29, 2019. The purchaser agreed to pay for the equipment by January 15, 2020 3. Based on close examination of the client's aged accounts receivable trial balance and correspondence files with customers, the auditor determined that management's allowance for bad debts is overstated by $42,000. 4. Expenses totaling $62,000 associated with the maintenance of equipment were inappropriately debited to the equipment account. 5. Marketing expenses of $66,000 were incorrectly classified as cost of goods sold. 6. The company received new computer equipment on January 3, 2020, that had been ordered and shipped F.O.B. shipping point to Wionna on December 27, 2019. No entry has been recorded for this purchase, which was financed by a long-term note payable due in full June 30, 2021. Print DoneRequirement a. Prepare an Unadjusted Misstatement Audit Schedule. (Use a minus sign or parentheses to enter an understatement. For any unknown amounts known to be a possible misstatement, enter a "0" under the appropriate column headings. Enter a "0" under any column heading that is affected by the potential misstatement, but for which the net effect to its balance is zero. If any other input field is not used in the table, leave the input field empty; do not enter a zero. Enter an amount for each total, including any zero balances.) Possible Misstatement - Overstatement (Understatement) Income Total Current Noncurrent Current Noncurrent Assets Assets Liabilities Liabilities Before Tax Item Amount 1. 2 3 4. 5 6 TotalRequirement b. Balance sheet and income statement materiality for the audit of Wionna financial statements is $100,000. What is your conclusion about the financial statements if the audit findings are not corrected by Wionna management before you issue the audit report? The net effect of the adjustments to the balance sheet and the net effect of the adjustments to the income statement are each to the financial statements. Pretax income would be the income statement materiality if adjustments are not made. Current assets are misstated by than materiality. Even though the net effect of adjustments to current assets and noncurrent assets is than materiality for total assets, the fact that a major financial statement line item, such as current assets, is misstated by than materiality, the adjustments be made to fairly state the financial statements
