Appendix 2: Notes from meeting Dan Wilson and Doug Joyce explained that NorthJet operates in a very competitive environment. The economic downturn has resulted in fewer charter ights and airlines have been offering reduced rates to remain competitive. NorthJet has been paying strict attention to cost controls and have introduced a bonus for management that is based on the company's protability. Recently two of NorthJet's major customers have gone into bankruptcy. There is $41,250 in advanced ticket sales related to these customers. Northlet held a manager's retreat last month to think of ways to boost the business. The company intends on offering an exclusive business class service for business customers such that they can y to and from a major city in the same day. This service will begin in the new year. Northlet is optimistic that there will be an 80% uptake of seats on these flights that will he offered from Monday through Friday. One of NorthJet's planes was damaged because of a re in the cockpit. Although the plane was insured the insurance company is disputing the claim because the company did not meet safety standards that were required in the industry. The cost of the damage is estimated at $105,000. Because NorthJet is anticipating additional ights in the new year, it will need to lease or purchase additional planes. NorthJet has begun discussions with a leasing company regarding leasing the planes. They expect the leasing agreements to be in place by year end. Appendix 3: Notes regarding the accounts receivable and property, plant and equipment work performed by the junior auditor. Accounts Receivables I Unearned Revenue When clients book charter ights, the ight is prepaid, and the amounts are recorded in unearned revenue. Once the service has been provided (the client takes the ight) the unearned revenue related to the ight is transferred to revenue. Large well-established clients do not have to prepay and are invoiced for the amounts of the ights. These represent the accounts receivable amounts on the balance sheet. The prior year audit le indicates there were issues with accounts receivables in prior years - NorthJet had accounted for unearned revenue as accounts receivable. The junior accountant performed analytical review on the accounts receivable noting that percentage of accounts receivable as a percentage of total assets was consistent with the prior year. There were several credit balances in accounts receivable which the junior ignored. No confirmations of accounts receivable were performed. The junior auditor concluded the accounts receivable were fairly stated for the interim period. Property Plant and Equipment Property plant and equipment represents the largest item on the balance sheet and represents the planes that Northjet owns as well as leased planes. They are separated in the general ledger accounts. The junior auditor traced each item on the subsidiary ledger to the original invoice, added the subsidiary ledger and agreed the total to the general ledger. Then the junior auditor signed the working paper concluding that property plant and equipment was fairly stated for the interim period