Case Requirements

$(1)$ For December $31,2023,$ perform an ageing analysis assessment of the allowance for doubtful accounts using all of the information your team has gathered. Use an Excel spreadsheet to formally support your team's calculations. Feel free to use the controller's allowance analysis as a starting point for your team's own analysis. Specific items to be answered:

a$.$ The company pooled all accounts receivable balances together to perform their aging analysis versus doing a specific analysis by customer plus a pooled approach as we have discussed in class.

i$.$ What are the advantages of doing this approach?

ii$.$ What are the disadvantages of such an approach?

iii. Based on what you have learned in class and from this case, what does your team believe to be the best approach between the pooled approach, the specific customer analysis approach, or a hybrid of both for the company to consider using in the future for their aging analysis?

b$.$ For each of the customer's listed in the narrative,

i$.$ document in a Word document and explain your conclusions on the collectability amounts for the full Accounts Receivable balances that are directly supported by your calculations. $($i$.$e$.$ I should be able to see your calculations and then read your conclusions to understand your final decision. If I cannot tie these together, it will be considered an incomplete analysis$).$

You also should explain how you handled all other smaller customer balances and Online based sales and the related collectable balances. It is acceptable to document a $($narrow or reasonable$)$ range for your final Allowance for Doubtful Accounts balance estimate.

c$.$ Explain how the compensation incentive program for the credit manager may contribute, either positively or negatively, to his analysis of collectable balances. What critical audit concept$($s$)$ may be impaired$/$questioned because of this arrangement? List all concepts that may be impaired$/$questioned based on our class materials.

d$.$ How would the debt covenant impact the decisions made by the CFO and credit manager for the requirement of at least $$10M$ in earnings? What qualitative concerns would the auditor have based on this requirement?

e$.$ Name at least $2$ test of details or substantive procedures would you recommend the auditor perform in addition to the ageing analysis? Be specific and use your textbook, class discussions, and any research you may perform to list out those additional.

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