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.

(A)Send a second request for confirmation to the customer.

(B)Exception noted; propose adjustment and request that the controller post it to the accounting records.

(C)Verify by examining subsequent cash collections and/or shipping documents.

(D)Verify that additional invoices noted on confirmation pertain to the subsequent year.

(E)Not an exception, no further audit work deemed necessary.

(F)Not an exception, no adjustment necessary. Determine the sufficiency of allowance for doubtful accounts.