Ceanview Marine Company tatement of Income and Retained Earnings December 31, 2018 Sales 1-2 Sales returns and allowances Net sales Cost of sales Gross profit PBC 2018 $26,456,647 37,557 26,419,090 19,133,299 7,285,791 2017 2016 $22,889,060 $20,950,521 27,740 28,753 22,861,320 20,921,768 16,530,114 15,176,410 6,331,206 5,745,358 EXPENSES Accounting and auditing Advertising Depreciation Bad debt expense Business publications Cleaning services Fuel Garbage collection 46,750 27,947 44,610 24,654 41,538 147,629 Insurance Interest Legal Licensing and certification fees Linen service Medical benefits Miscellaneous Office supplies Payroll benefits Pension expense Postage and courier Property taxes Rent Repairs and maintenance Salaries and wages Security Telephone Travel and entertainment Utilities Total Expenses 48,253 28,624 46,415 148,252 1.231 15,817 64,161 4,870 16,415 427,362 69,752 33,580 3,044 4,178 47,739 26,390 569,110 40,770 8,623 3,978 158,526 51,316 4,310,281 96,980 5,707 21,633 63,329 6,316,336 969,455 344,605 624,850 46,578 162,344 872 12,809 53,566 4,674 16,303 364.312 29,914 27,142 1,939 4,624 16,631 23,289 461,214 37,263 20,962 27,947 120,000 26,439 3,970,092 100,098 7,092 16,303 41,919 5,669,023 662,183 239,406 422,777 115 115 11,620 41,593 5,650 16,144 356,829 22,654 24,148 2,393 4,287 25,430 21,462 430,688 18.900 22,511 26,144 112,846 26,519 3,703,580 93,800 8,611 14,952 40,827 5,290,134 455,224 199,631 255.593 Net income before income tax Income tax expense NET INCOME 6,518,413 100,000 $7,043,263 6,195,636 100,000 $6.518,413 6,040,043 100,000 $6,195,636 Retained earnings at beginning of year Less: Dividends Retained earnings at end of year The accompanying notes are an integral part of these financial statements Current workpapers --- audit planning + 2-5-a Oceanview Marine Company Identification of Significant Risks of Material Misstatement December 31, 2018 Account: Sales Current Unadjusted Balance: $ 26,456,647 Prior Year's Audited Balance: $ 22,889,060 Nature of potential material misstatement: Potential overstatement of sales due to: 1) Fictitious sales recorded in 2018 2) Cutoff errors (2019 sales recorded in 2018) Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Yes. Increase in revenue is significant and auditing standards require identifying revenue recognition as a fraud risk. Audit procedure to be performed to address identified risk (be specific): Review sales recorded near year end, including confirmation of accounts receivable for any special terms. 2) Increase extent of cutoff testing to determine whether any sales which occurred in January 2019 were record in December 2018, Prior Year's Audited Balance: Account: Current Unadjusted Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Oceanview Marine Company Identification of Significant Risks of Material Misstatement (continued) December 31, 2018 2-5- Account: Current Unadjusted Balance: Prior Year's Audited Balanc Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Account: Current Unadjusted Balance: Prior Year's Audited Balance Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Ceanview Marine Company tatement of Income and Retained Earnings December 31, 2018 Sales 1-2 Sales returns and allowances Net sales Cost of sales Gross profit PBC 2018 $26,456,647 37,557 26,419,090 19,133,299 7,285,791 2017 2016 $22,889,060 $20,950,521 27,740 28,753 22,861,320 20,921,768 16,530,114 15,176,410 6,331,206 5,745,358 EXPENSES Accounting and auditing Advertising Depreciation Bad debt expense Business publications Cleaning services Fuel Garbage collection 46,750 27,947 44,610 24,654 41,538 147,629 Insurance Interest Legal Licensing and certification fees Linen service Medical benefits Miscellaneous Office supplies Payroll benefits Pension expense Postage and courier Property taxes Rent Repairs and maintenance Salaries and wages Security Telephone Travel and entertainment Utilities Total Expenses 48,253 28,624 46,415 148,252 1.231 15,817 64,161 4,870 16,415 427,362 69,752 33,580 3,044 4,178 47,739 26,390 569,110 40,770 8,623 3,978 158,526 51,316 4,310,281 96,980 5,707 21,633 63,329 6,316,336 969,455 344,605 624,850 46,578 162,344 872 12,809 53,566 4,674 16,303 364.312 29,914 27,142 1,939 4,624 16,631 23,289 461,214 37,263 20,962 27,947 120,000 26,439 3,970,092 100,098 7,092 16,303 41,919 5,669,023 662,183 239,406 422,777 115 115 11,620 41,593 5,650 16,144 356,829 22,654 24,148 2,393 4,287 25,430 21,462 430,688 18.900 22,511 26,144 112,846 26,519 3,703,580 93,800 8,611 14,952 40,827 5,290,134 455,224 199,631 255.593 Net income before income tax Income tax expense NET INCOME 6,518,413 100,000 $7,043,263 6,195,636 100,000 $6.518,413 6,040,043 100,000 $6,195,636 Retained earnings at beginning of year Less: Dividends Retained earnings at end of year The accompanying notes are an integral part of these financial statements Current workpapers --- audit planning + 2-5-a Oceanview Marine Company Identification of Significant Risks of Material Misstatement December 31, 2018 Account: Sales Current Unadjusted Balance: $ 26,456,647 Prior Year's Audited Balance: $ 22,889,060 Nature of potential material misstatement: Potential overstatement of sales due to: 1) Fictitious sales recorded in 2018 2) Cutoff errors (2019 sales recorded in 2018) Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Yes. Increase in revenue is significant and auditing standards require identifying revenue recognition as a fraud risk. Audit procedure to be performed to address identified risk (be specific): Review sales recorded near year end, including confirmation of accounts receivable for any special terms. 2) Increase extent of cutoff testing to determine whether any sales which occurred in January 2019 were record in December 2018, Prior Year's Audited Balance: Account: Current Unadjusted Balance: Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Oceanview Marine Company Identification of Significant Risks of Material Misstatement (continued) December 31, 2018 2-5- Account: Current Unadjusted Balance: Prior Year's Audited Balanc Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific): Account: Current Unadjusted Balance: Prior Year's Audited Balance Nature of potential material misstatement: Does the risk of material misstatement represent a significant risk due to fraud or error? Explain. Audit procedure to be performed to address identified risk (be specific)