I need to finish assignment

Assignment 6

WPs 21-1, 21-2, 21-3, 21-5, 21-6, 21-17, 21-18, 21-19, 21-20, 21-21

Assignment 7

WPs 30-1, 30-2, 30-4, 30-5, 30-21, 30-22, 30-23, 30-24

Assignment 8

WPs 20-1, 20-2, 20-3, 20-4, 20-6, 20-7, 20-8

Assignment

WPs 22-1, 22-6, 22-7, 22-15, 22-18, 22-19

here is the template for this assignment. Some of part of the assignment have already been done just need help with the ones thats not done. i can provide the assignment material and case template upon acceptance of the problem.

I would really appreciate the help

Ocean view Marine Company Control Environment - Summary December 31, 2012 10-8 WX 02/23/2013 Level of Control 1. General: Strong Weak Managments' philosophy and operating style Yes Comments Worksheet 10.1 indicates that Management philosophy and operating style weak as the company profit margin is low Organizational structure Yes The earlier worksheet shows that organizational structure strong as management and employees between less disputs and sttrong relation Methods to communicate the assignment of authority and responsibility Yes The earlier worksheet indicates that communication method strong as employees understand their responsibilities and roles in the company. Management control methods weak indicates in the earlier worksheet as the Management control methods Yes Audit committee The earlier worksheet represents that audit committee weak as the company has developed the strong audit team or committee Yes Internal Audit Yes Personnel policies and procedures Yes External infuences 2. Computer Hardware Systems Software 3. Computer Sotware Applications 4. IT Department Yes Internal audit weak shown in earlier worksheet as Audit team members has The earler worksheet represents that personnel policies and procedures weak as has not focused on internal control and external audit Worksheet mentions that the company performance has been affected on exte Yes Worksteet 10.5 presents that CHSS has stronguses has not faced any technical issued during run systems Yes Worksteet 10.6 shows that CSA has strong as people has not faced any issued during run software applications Yes Control level of IT department has week as indicate on worksheet 10.7, segregation of functions between the users and IT deparment is lacking. Conclusions: On the basis of level of control section, it can be concluded that the company has faced issued to internal control of the business as enhance in revenues, but expenses rapidly enhanced that reduce profit margin. The management could be not able to control the activities and effectively utilizes the resources that impacts on the performance of the business. Company hardware and software system strong, but it IT system weak due to the lacking of ability to protect the users information and data. Internal and external audit weak area of the company that should improve by the company to improve internal control. Oceanview Marine Company Statistical Attributes Sampling Data Sheet: Sales December 31, 2012 Define the objective: 12-6 WX 02/23/2013 Evaluation of internal controls and the accounting system for sales . Define the population precisely: Sales transactions that occurred between Jan. 1, 2012 and Dec. 31 2012, inclusive. Define the sampling unit, organization of population items, and random selection procedures: Sales transactions as identified by sales invoice number, recorded sequentially in the sales journal. Computer-generated random sample. Planning Actual Results EPER TER ARACR Sample Size Sample Size Number of Exceptions CUER 1.50 8 10 48 55 2 7 2. Goods have been shipped to customer (E) 1.00 7 10 55 55 0 6 3. Amount recorded in journal agrees with invoice total. (A) 1.50 7 10 55 55 0 6 4. Footings and extensions on the sales invoices are correct. (A) 1.50 8 10 48 55 0 7 5. Price(s) per unit on invoices agree with approval price list. (A) 1.50 8 10 48 55 0 7 1.50 8 10 48 55 0 7 2.00 8 10 48 55 1 6 1.50 9 10 42 55 1 8 Description of Attributes 1. Proper approval of customer credit information. (E) 6. Quantity(ies) on sales invoice agree with quantity(ies) on bill of lading and customer order (A) 7. Proper accounts were debited and credited. (CI) 8. Sales transaction recorded promptly after shipment. (T) * Audit Object for Test of Controls and Substantive Test of Transactions: Accuracy Existence or occurrence Classification Posting & summarization Completeness Timing Ocean view Marine Company 13-1 Audit Program: Evaluation of Internal Control over Axquisitions WX 02/23/2013 December 31, 2012 Part 1: Obtain an understanding of the client's internal controls Discuss the control environment, accounting system, and control activities with management and client personnel 2. Obtain and study client's policy and procedure manuals and examine documents and records used in the accounting system. 3. Observe control-related client activities over purchases and cash disbursements. Date BC 1/28/2013 W/P 13-1 BC 1/28/2013 W/P 13-1 BC 1/28/2013 W/P 13-1 BC 1/29/2013 W/P 13-2 BC 1. Initials Comments or W/P Reference 2/28/2013 W/P 13-3 BC 3/15/2013 W/P 13-4 Part 2: Document your understanding of the client's internal control 4. 5. Prepare a flowchart of the accounting system for acquisitions, including document flow, processing, disposition of documents, and control activities. Complete the "Internal Control Questionnaire - Acquisitions". Part 3: Preliminary assessment of control risk 6. Using the information obtained above, complete the "Preliminary Assessment of Control Risk - Acquisitions" matrix 13-3 OCEANVIEW MARINE COMPANY Internal Control Questionnaire: Acquisitions December 31, 2012 Control Objectives and Questions (1) Are purchases transactions supported by approved purchase orders? * E YES Yes WX 02/23/2013 NO REMARKS Approvals Manager or Inventory Manager (2) Are documents cancelled to prevent re-use? (3) Are receiving reports prenumbered and properly accounted for? E Yes Approvals Manager prevent re-use for evidance of cancellation. Co Yes Accountant for completeness. (4) Are receiving reports controlled in a manner that helps assure that all goods received are recorded? Co Yes Accountant or Approval Manager ensure that all goods received are counted (5) Is there internal verification of the calculations, prices, and quantities on vendors' invoices? A Yes Accountant or Auditor (6) Does someone independent of the recording of purchases function verify that the proper accounts have been debited and credited for purchases transactions? Cl Yes Accountant (7) Is there an independent comparison of dates on receiving reports to dates recorded in the voucher register? T Yes Approvals Manager or Inventory Manager (8) Is there a policy requiring recording of purchases on a daily basis as close to time of receipt of goods as possible? T Yes Accountant (9) Is the voucher register independently footed and posted to the general ledger? P Yes Accountant (10) Is an independent reconciliation of the accounts payable subsidiary records and the general ledger performed regularly? P Yes Accountant * Audit Objective for Tests of Controls and Substantive Tests of Transactions: Accruacy Existence or occurrence Classification Posting & summarization Completeness Timing Enter H (high), M (medium), or L (low) in each column Accuracy Classification Timing Posting and Summarization Existing Controls 1. Managments' philosophy and operating style 2. Organizational structure Methods to communicate the assignment of authority 3. and responsibility 4. Management control methods 5. Audit committee 6. Internal Audit 7. Personnel policies and procedures 8. External infuences 9. Control Deficiencies: 1. Computer Hardware Systems Software 2. Computer Sotware Applications 3. IT Department 4. Preliminary assessment of control risk: Completeness Objectives: 13-4 WX 02/23/2013 Existence/ Occurrence OCEANVIEW MARINE COMPANY Preliminary Assessment of Control Risk Acquisitions December 31, 2012 M H L H L M M L M M H M H M M M H L M H L H H M H L M L L M M M L M M M H L L L M L M M H H H M H H H H M M M M L H M M M H M H H M 14-1 Oceanview Marine Company Audit Program (planning format): Tests of Controls for Acquisitions December 31, 2012 Objectives Existing Controls(s) WX 02/23/2013 Tests of Control(s) Vendors' invoices, receiving reports, purchase orders, and purchase requisitions. Receiving reports are prenumbered and accounted for regularly (W/P 13-3, #3). Completenessall acquisition transactions are recorded The audit procedures commonly used to test controls are (1) inspection of client documents, (2) observation of client activities and events, (3) inquiry of client personnel, or (4) reperformance. Documents are cancelled to prevent reuse (W/P 13-3, #2) Existence/occurrence recorded acquisition transactions are for goods and services actually received Purchases transactions are supported by approved purchase orders (W/P 13-3, #1). Purchase order, vendor invoice, and receiving report Receiving reports are controlled in a manner that helps assure that all goods received are recorded (W/P 13-3, #4). Receipt of goods, materials, equipment, and supplies. Accuracyacquisition transactions are Internal verification of invoice recorded at the correct amounts information (W/P 13-3, #5). Compare checks to invoices & reconcile bank statement monthly. Independent verification that the proper Classificationacquisition accounts have been debited and credited Bank transactions & disbuted transactions transactions are debited and credited to for purchases transactions (W/P 13-3, the proper accounts #6). Timingacquisition transactions are recorded on the correct dates Posting and summarization acquisitions are correctly totaled in the voucher register and posted to the G/L and subsidiary records None. Voucher register is independently footed and posted to the general ledger (W/P 13- The revenue journals and the cash receipts journal 3, #9). Independent reconciliation of A/P Each A/P company may be interfaced into it's own subsidiary records and the G/L performed G/L, or into a corporate G/L system. regularly (W/P 13-3, #10). Oceanview Marine Company Audit Program (planning format): Substantive Tests of Acquisitions Transactions December 31, 2012 Objectives 14-2 WX 02/23/2013 Substantive Tests of Transactions The auditor should test a sample of vouchers for authorization and the presence of the Existence/occurrencerecorded acquisition transactions are for goods and receiving report. services received Completenessall acquisition transactions are recorded The auditor should trace a sample of vouchers to the purchase journal. Accuracyacquisition transactions are recorded at the correct amounts The auditor should recomputed the mathematical accuracy of a sample of vendor invoices. Classificationacquisition transactions The auditor should verify the account classification of a sample of purchases. are debited and credited to the proper accounts Timingacquisition transactions are recorded on the correct dates The auditor should compare dates on a sample of vouchers with the dates the transactions were recorded in the purchase journal. The auditor should also examine purchases before and after year-end to determine if they were recorded in the proper period. Posting and summarization acquisitions are correctly totaled in the voucher register and posted to the G/L and subsidiary records The auditor should select a sample of checks recorded in the cash disbursement journal and examine supporting invoices, purchase orders, and receiving reports containing the proper check number and date for each cash disbursement. Oceanview Marine Company Audit Program (performance format) Tests of Controls and Substantive Tests of Transactions: Acquisitions December 31, 2012 AUDIT PROCEDURES 1. Select a sample of 70 voucher register (purchases journal) entries and for each entry: 14 - 3 WX02/23/2013 * W/P INIT 14-5 COMMENTS 0 Exception found 2 Attribute #2 on W/P 14-7 a. Review the purchase order for appropriate approval E 14-7 b. Vouch to the receiving report or other supporting document to ensure goods or services were received Attribute #3 on W/P 14-7 E 14-7 3 c. Compare amount recorded in voucher register with total on vendor's invoice A 14-7 4 Attribute #4 on W/P 14-7 d. Verify the mathematical accuracy of information on the vendor's invoice Attribute #5 on W/P 14-7 A 14-7 5 e. Compare quantity(ies) on invoice with quantity(ies) on receiving report and purchase order A 14-7 5 f. Determine that all documents in voucher package are canceled (stamped "paid") to prevent re-use E 14-7 6 Attribute #6 on W/P 14-7 g. Review supporting documents to verify proper account classification CI 14-7 7 Attribute #7 on W/P 14-7 h. Compare the dates actually recorded with dates on supporting receiving reports T 14-7 8 Attribute #8 on W/P 14-7 Co 14-10 BC No exceptions found P 14-10 BC No exceptions found Co 14-9 BC No exceptions found 4. Test the accuracy of the footings in the voucher register, and trace postings of totals to the general ledger P 14-9 BC No exceptions found 5. Determine by inspection that an independent reconciliation of the A/P subsidiary records and the G/L is performed regularily P 14-9 BC No exceptions found Attribute #5 on W/P 14-7 2. Select a sample of 70 receiving reports and: a. Trace each to the voucher register (purchases journal) b. Trace posting from voucher register to A/P subsidiary records 3. Determine by inspection that receiving reports are prenumbered, and are accounted for. * Audit Objective for Tests of controls and Substantive Tests of Trasactions Accuracy Classification Completeness Existence or Occurence Posting & Summarization Timing Oceanview Marine Company Audit Program (performance format) Tests of Controls and Substantive Tests of Transactions: Acquisitions (continued) December 31, 2012 1. CONCLUSIONS: The preliminary assessment of control risk indicates the classification objective was high. Consequently, controls over classification were not tested. On the basis of unfavorable results of tests of attribute #1, it predicts that approval of customer credit and control risk for the Existence or occurrence objective is increased to medium. (This will also affect the Realizable Value objective for year-end tests of balances.) It can be concluded that results of substantive tests of transactions were favorable and support reduction of yearend substantive tests of balances. 2. EFFECT OF RESULTS ON AUDIT PLAN: Excluding as noted above, controls over sales and accounts receivable appear to be operating as documented and may be relied on. Acoount receivalbe write-offs and collections subsequent to year-end should be reexamined to evaluate whether a decline in credit quality requires an increase in the allowance for bad debts account. 3. RECOMMENDATIONS TO MANAGEMENT: It is recommand that client is importance of credit approval. It also recommend that client implement an internal verification policy to check for proper debit/credit classification for sales transactions. Oceanview Marine Company Non-statistical Attributes Sampling Data Sheet: Acquisitions December 31, 2012 Define the objective: 14-7 WX 02/23/2013 Evaluation of internal controls and the accounting system for acquisitions. Define the population precisely: Purchase transactions that occurred between Jan. 1 2012, and Dec. 31, 2012, inclusive. Define the sampling unit, organization of population items, and random selection procedures: Purchase transactions as identified by voucher numbers recorded sequentially in voucher register. Computer-generated random sample. Planning Description of Attributes 1. Document package includes all documents appropriate for the transaction. (E) EPER 1% Actual Results TER ARACR 7% 10% Sample Size Sample Size Number of Exceptions Sample Exception Rate Estimated Sampling Error 55 70 2 2.86% 4.0% CUER 10.0% 2. Proper approval of purchase order. (E) 8% 10% 48 70 3 4.29% 4.0% 11.0% 3. Goods have been received. (E) 1% 7% 10% 55 70 4 5.71% 4.0% 10.0% 4. Amount in voucher register agrees with amount on vendor's invoice. (A) 1% 7% 10% 55 70 5 7.14% 4.0% 10.0% 5. Quantities on vendor's invoice agree with related receiving report and P.O., and invoice is mathematically correct. (A) 1% 7% 10% 55 70 5 7.14% 4.0% 10.0% 6. All documents in voucher package have been stamped "paid". (E) 1% 8% 10% 48 70 6 8.57% 4.0% 11.0% 7. Proper accounts were debited and credited. (Cl) 1% 8% 10% 48 70 7 10.00% 4.0% 11.0% 8. Acquisitions recorded promptly after receipt of goods. (T) * 1% 3% 8% 10% 52 70 8 11.43% 4.0% 9.0% Audit Object for Test of Controls and Substantive Test of Transactions: Accuracy Existence or occurrence Classification Posting & summarization Completeness Timing Oceanview Marine Company Attributes Sampling Exception Form: Acquisitions December 31, 2012 14-8 WX 02/23/20 This form is to be used to document the findings of tests of controls and substantive tests of transactions. In the column on the left, write the name and the document number of each document tested. The numbers across the top of the matrix correspond to the "Description of Attributes" column on the Attributes Sampling Data Sheet. For each document in the column one, place and "X" in the column below the number of the attribute being tested by that document if there is an exception. Also use an "X" if one or more documents required to perform the test are missing (assuming the missing document(s) are applicable to the transaction). Leave it blank if there is no exception. RECORD OF EXCEPTIONS Identity of Item Selected Document Number Voucher 677 Voucher 1010 Voucher 1409 Voucher 2280 Voucher 3028 65 additional items Total Number of Exceptions Total Sample Size Attributes 1 Document package includes all documents appropriate for the transaction. (E) Proper approval of purchase order. (E) Goods have been received. (E) Amount in voucher register agrees with amount on vendor's invoice. (A) Quantities on vendor's invoice agree with related receiving report and P.O., and invoice is mathematically correct. (A) 70 2 1% 1% 1% 1% 1% 3 7% 8% 7% 7% 7% 70 70 4 10% 10% 10% 10% 10% 70 5 55 48 55 55 55 6 70 70 70 70 70 7 2 3 4 5 5 8 3% 4% 6% 7% 7% 70 70 70 70 OCEANVIEW MARINE COMPANY Cash Leadsheet 20-1 December 31, 2012 WX 02/25/2013 2007 Balance Account Number and Name 1010 - Petty cash 1015 - Bank, payroll 1020 - Bank, general Net Adjustments 2007 Adjusted Balance 2006 Balance % Change (before adjustment) 200 G/L 20-6 Total 2,000 PY 0.00% 1,087,778 PY 21.15% 1,089,978 F 21.11% 1,317,896 G/L 1,320,096 F Tickmark legend G/L Agreed to general ledger. PY Agreed to prior year's workpapers. F Footed without exception. 0.00% 2,000 G/L 20-5 200 PY 0.00 20-2 Oceanview Marine Company Audit Program Cash December 31, 2012 AUDIT PROCEDURES * W/P WX 02/25/2013 INIT COMMENTS MODIFICATIONS TO AUDIT PROGRAM 1. Based on the results of previous audit procedures, complete appropriate modifications to this program. TESTS OF BALANCES - CASH ON HAND BC As noted below. 2. In the presence of client, count petty cash fund, undeposited receipts, and other cash. A E BC Petty cash counted Dec. 31, 2007. No exceptions. Cynthia present. 3. Obtain explanations of differences between the petty cash float and the cash count. A BC N/A. No difference. Co BC BC None None 4. Note any IOUs, reused vouchers, or stale dated checks. Other procedures: TESTS OF BALANCES - CASH IN BANK 5. Obtain cutoff bank statements directly from the bank for all bank accounts open at any time during the year per bank confirmation or company records. BC 6. Obtain bank confirmations, directly from the bank, for all accounts open at any time in the year. 7. Obtain year-end bank reconciliations for all accounts. 8. For each reconciliation, trace the balance per books to the general ledger. 9. Verify the arithmetic accuracy of each reconciliation. D A 10. For each reconciliation, trace the balance per bank (unadjusted) to the bank confirmation. *Audit Objectives: Accuracy Classification Detail tie-in Existence Completeness A E Co A D A Cutoff Presentation and disclosure Realizable value Rights and obligations E 20-7 20-5 20-6 BC BC 20-5 20-6 20-5 20-6 BC BC WX Done for payroll and general bank account. Done for payroll bank acct. Done for general account. 20-7 20-7 BC WX Done for payroll bank acct. Done for general account. Oceanview Marine Company Audit Program Cash (continued) December 31, 2012 WX 02/25/2013 W/P 20-5 20-6 INIT BC WX COMMENTS Done for payroll bank acct. Done for general account. 20-5 20-6 BC WX Done for payroll bank acct. Done for general account. 20-5 20-6 BC WX N/A for payroll bank acct. Done for general account. 20-5 20-6 20-7 BC No unusual items. BC No restrictions. 20-8 WX No exceptions. (b) Trace any outstanding deposits or outstanding checks to bank reconciliation. 20-8 WX No exceptions. (c) Trace dates and amounts to cash receipts and cash disbursements journals. 20-8 BC No exceptions. 20-8 WX BC No exceptions. None. AUDIT PROCEDURES 11. Trace checks over $1,000 on cutoff statement to list of outstanding checks on year-end bank reconciliation. 12. Investigate checks over $1,000 on the reconciliation that did not clear by the cutoff statement date. 13. Trace all deposits-in-transit from bank reconciliation to cutoff statement(s). on bank statement to reconciliation or books as appropriate. Inquire about old or unusual items on reconciliation. 15. Verify bank confirmation and inquire of management whether there are any restrictions preventing use of cash for current purposes. 16. Perform tests of interbank transfers occurring within 10 days of year-end: (a) Determine that date per books for disbursing and receiving accounts are in the same period. (d) Trace dates and amounts to bank statements (cutoff statements for amounts after year-end). Other Procedures: *Audit Objectives: Accuracy Classification tie-in Existence Completeness Cutoff Presentation and disclosure Realizable value obligations Detail Rights and * A Cu E A Co Cu A Cu E A E P R A Cu Co E 20-3 20-4 Oceanview Marine Company Audit Program Cash (continued) December 31, 2012 AUDIT PROCEDURES ANALYTICAL PROCEDURES 17. Compare ending cash balances with other month-end balances and prior year(s). Obtain explanations and other evidence as appropriate to account for unexpected Other procedures: STATEMENT PRESENTATION * A Co E INIT COMMENTS BC Compared 2006 and 2007 month to month. No unusual variances other than those caused by normal sales cycles. None BC P groupings and compare to prior year. Reclassify credit balances as current liabilities. Consider re-classification for restricted or appropriated cash. Other procedures: CONCLUSION W/P WX 02/25/2013 BC No credit balances. Classification is appropriate. BC None 18. Review 19. State, in your opinion, if the cash reported in the financial statements is fairly presented and is in accordance with GAAP. *Audit Objectives Accuracy Classification Completeness Cutoff Detail tie-in Existence Presentation and disclosure Realizable value Rights and obligations OCEANVIEW MARINE COMPANY Bank Reconciliation - General Bank Account 20-6 December 31, 2012 WX 02/25/2013 PBC 1,332,686.93 Balance per bank statement Balance per books, unadjusted 20-7 Deposits in transit: Dec. 30 .2012 Dec. 30 .2012 Add: 1,317,896.00 G/L Adjustments: 26,262.78 12,346.98 ~ ~ 0.00 38,609.76 Deduct: Outstanding checks: 5835 5919 6016 6139 6245 6248 6249 6251 6252 6254 6256 6257 6258 6260 6261 6263 6264 6265 6266 6267 6268 6269 Nov. 02 .2012 Nov. 23 .2012 Dec. 07 .2012 Dec. 21 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Dec. 28 .2012 Balance per bank, adjusted 1,516.18 375.75 679.00 345.00 5,670.00 984.00 2,350.49 321.48 3,781.70 672.58 1,251.83 12,987.35 337.12 1,841.80 456.90 149.15 1,385.29 456.86 3,450.91 733.00 200.00 13,454.30 ~ ~ ~ ~ ~ ~ ~ ~ ^ ~ 53,400.69 1,317,896.00 Balance per books, adjusted 1,317,896.00 Tickmark legend ~ ^ G/L F Agreed to check clearing with cuttoff bank statement Check did not clear with cutoff bank statement. Reviewed January 2013 bank statement, check cleared in January 2013. Agreed to general ledger balance. Footed without exception. 20-1 20-7 STANDARD FORM TO CONFIRM ACCOUNT BALANCE INFORMATION WITH FINANCIAL INSTITUTIONS Financial Institution's Name and Address WX 02/25/2013 Oceanview Marine Company CUSTOMER NAME FIRST NATIONAL BANK 317 Fifth Avenue Ocean City, Florida 33140 We have provided our accountants the following information as of The close of business on December 31, 2012, regarding our deposit and loan balances. Please confirm the accuracy of the information, noting any exceptions to the information provided. If the balances have been left blank, please complete this form by 1. At the close of business on the date listed above, our records indicated the following deposit balance(s): ACCOUNT NAME ACCOUNT NUMBER 010-123456 030-987654 Payroll General INTEREST RATE N/A N/A BALANCE $10,451.38 $1,332,686.93 20-5 2. We were directly liable to the financial institution for loans at the close of business on the date listed above as follows: ACCOUNT NO./ DESCRIPTION BALANCE* DATE DUE INTEREST RATE DATE THROUGH WHICH INTEREST IS PAID DESCRIPTION OF COLLATERAL $5,100,000 Receivables and Demand 9.50% Dec. 8, 2012 Line of credit 32-1 inventory Cynthia Rathberg 1-Jan-13 (Customer'swith our records. Although we have not conducted a comprehensive, detailed search of our records, no other deposit or loan accounts have (Date) our attention except as Authorized Signature) The information presented above by the customer is in agreement come to noted below. Robert Johnson (Financial Institution Authorized Signature) Vice-President (Title) 10-Jan-13 (Date) EXCEPTIONS AND/OR COMMENTS None *Ordinarily, balances are intentionally left blank if they are not available at the time the form is prepared. NY,NY 10108-1003 Lilts Berger & Associates Please return this form directly to our accountants: 100 Main Street Ocean City, Florida 33140 Oceanview Marine Company Accounts Receivable Leadsheet December 31, 2012 Account Number and Name 1100 - Accounts receivable 21-9 1110 - Allowance for bad debts 21-2 Total Tickmark legend G/L PY F 21-2 2012 Net Balance Adjustments 1,762,682 1,576 G/L ($116,636) G/L 1,646,046 F Agreed to general ledger. Agreed to prior year's workpapers. Footed without exception. 1576 21-1 WX02/24/2013 2012 Adjusted Balance 1,764,258 1,647,622 % Change 2010 (before Balance adjustment) 1,402,229 25.71% PY ($116,636) PY 1,285,593 F 0.00% 28.04% OCEANVIEW MARINE COMPANY Schedule of Interbank and Intercompany Transfers December 31, 2013 Amount Transfer from general to payroll Check #6274 WX 02/25/2013 Disbursing Account Date per Books Transfer from general to payroll Check #6269 20-8 Date per Bank Receiving Account Date per Books Date per Bank 13,454.30 * W/P 20-6 12/28/12 X 1/4/13 ~ 12/28/12 ^ 12/28/12 10,000 * 1/4/13 X 1/7/13 ~ 1/4/13 ^ 1/6/13 Audit Tickmark legend * X Traced and agreed the disbursement date per books to the cash disbursements journal (no exceptions noted). ^ Traced and agreed the receipt date per books to the cash receipts journal (no exceptions noted). ~ Traced and agreed payee, payor, check number, and check amount to the cash disbursements journal (no exceptions noted). Traced to year-end bank statement. Traced and agreed to cutoff statement after year-end Oceanview Marine Company Adjusting Journal Entries: Accounts Receivable December 31, 2012 21-2 WX 02/24/2013 Account Number and Name Debit Credit 6100 -Bad debts expense $31,706 1110 - Allowance for bad debts $31,706 Explanation: To adjust allowance account to estimated balance at year-end. Estimated allowance 21-15 $148,342 Per client's books $116,636 $ 1,576 1100 - Accounts receivable $ 1,576 Explanation: Adjust the account balance from difference in confirmed mistatement Oceanview Marine Company Audit Program - Accounts Receivable December 31, 2012 AUDIT PROCEDURES MODIFICATIONS TO AUDIT PROGRAM 1 Based on the results of previous audit procedures, complete the Planned Tests of Balances Matrix for accounts receivables and, if necessary, make appropriate modifications to this audit program. TESTS OF BALANCES 2 Obtain an aged listing of accounts receivable as of year-end and: (a) foot the listing and crossfoot totals. (b) trace total of aged receivables to the general ledger. (c) trace entries for individual customers from the aging analysis to the individual accounts in the accounts receivable subsidiary records. * WX 02/24/2013 W/P INIT COMMENTS No modifications necessary 21-7 to 21-9 D D BC No exceptions. 21-15 and 21-16 BC Adjustments required as noted on W/P 21-2. D 3 Perform confirmations of accounts receivable. Verify by confirmation or alternative means all accounts selected for confirmation. (a) determine sample size for confirmation testing. (b) select individual accounts for confirmation testing. (c) evaluate differences between receivable balances and confirmation responses (or alternative procedures). Determine whether differences are valid timing differences or misstatements. (d) generalize misstatements to the population of accounts receivable and evaluate acceptability of the population. 4 Review allowance for bad debts and: (a) discuss with management whether the allowance amount is adequate. (b) review payments received after year end. (c) prepare an analysis of the allowance account and compare to the general ledger. 21-3 A E A Co Rv Audit Objectives: Accuracy Classification Completeness Cutoff Detail tie-in Existence Presentation and disclosure Realizable value Rights and obligations Oceanview Marine Company Audit Program - Accounts Receivable (continued) December 31, 2012 AUDIT PROCEDURES 17 Compare aging categories as a percentage of accounts receivable with previous years. 18 Compare allowance for bad debts as a percentage of accounts receivable to previous years. Other procedures: STATEMENT PRESENTATION 19 Verify that any encumbrances are appropriately disclosed. 20 Verify that there is segregation of accounts and notes receivable and any long-term receivables. 21 Inquire whether there are any receivables from related parties. Other procedures: * Rv W/P Rv 21-16 21-5 WX 02/24/2013 INIT BC COMMENTS Differences not significant. BC Difference not significant. BC None P BC CP BC P BC A/R pledged to bank. Note to financial statements required. N/A. No long-term receivables. None. Inquired of Cynthia. BC None CONCLUSION 22 State, in your opinion, if the notes and accounts receivable reported in the financial statements are fairly presented and are in accordance with GAAP. Audit Objectives: Accuracy Classification Completeness Cutoff Detail tie-in Existence Presentation and disclosure Realizable value Rights and obligations Current file 3-tests of balances, completing the audit Page 13 Oceanview Marine Company Planned Tests of Balances Matrix - Accounts Receivable December 31, 2012 Analytical Procedures Audit Objectives Control Risk: Substantive Tests of Transactions: Acceptable Inherent (High, Sales Cycle Sales Cycle Audit Risk Risk Medium, or (High (High (High, (High, Low Medium, or Medium, or Medium or Medium, or potential for Low) Low) Low) Low) misstmts.) Low likelihood of misstmts.) Detail tie-in H M L H M L H M L H M L H M L H M L H M L H M L H M L Completeness H M L H M L H M L H M L H M L Accuracy H M L H M L H M L H M L H M L Classification H M L H M L H M L H M L WX 02/24/2013 Planned Tests of Balances (Extensive, Medium, or Reduced Tests) Comments * H M L Existence 21-6 H M L Improper Revenue Recognition Incentive for Private Company to understate value Inadequate amount of Accounts Receivable Risk of material misstatement Realizable value H M L Cutoff H M L H M L H M L H M L H M L Rights H M L H M L H M L H M L H M L Presentation and disclosure H M L H M L H M L H M L H M L Preliminary judgment about materiality: Tolerable misstatement for accounts receivable: H M L H M L H M L H M L Risk of inadequate realized value Revenue misstatement: Risk of overstating/understa ting A/R Risk of overstating A/R and revenue $75,000 $30,000 * For each audit objective with extensive or medium planned tests of balances (E or M in column seven), use column eight to indicate your primary concern(s) about that objective. Current file 3-tests of balances, completing the audit Page 14 Oceanview Marine Company Accounts Receivable Listing December 31, 2012 Customer Name Abbot, James Adams, Don Allen, Robert Anderson, Matt 0-30 days 61-90 days BC 2/05/2013 PBC 91-120 days Cumulative Total Total 21,345.00 0.00 0.00 134.76 0.00 0.00 0.00 125.32 0.00 259.45 0.00 0.00 21,345.00 259.45 432.00 495.75 Anthony Underwriters Bates, Mary Beatty, Lonnie Benson Realty Binkowski, Alex Bischoff, John Borst, Robert Capicchioni, Rita Chappelle, Daniel Chiang, Alpha 0.00 117,990.00 127.86 213.00 21,390.00 0.00 113.87 0.00 654.00 238.31 0.00 113,655.00 155,690.00 0.00 432.74 246.87 0.00 24,678.00 21,345.00 0.00 0.00 0.00 0.00 0.00 456.71 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 117,990.00 340.86 21,390.00 113.87 1,349.02 113,655.00 155,690.00 679.61 24,678.00 21,345.00 S 140,522.20 140,863.06 162,253.06 162,366.93 163,715.95 277,370.95 433,060.95 433,740.56 458,418.56 479,763.56 Coscarelli, Stephen DeLuca, Frank Detzler, Richard Devine, Dan Dugar, Amitabh Elder, Robert Elliott, David Erlinger, Eric Escobar, Susan Finney, Robert 0.00 22,458.00 0.00 121,456.00 245.68 476.89 345.76 4,567.00 0.00 0.00 0.00 0.00 0.00 0.00 123.65 367.90 247.69 0.00 11,567.00 0.00 0.00 0.00 0.00 0.00 0.00 543.00 0.00 0.00 0.00 0.00 145.56 0.00 1,145.00 0.00 0.00 0.00 0.00 0.00 0.00 22,154.75 145.56 22,458.00 1,145.00 121,456.00 369.33 1,387.79 593.45 4,567.00 11,567.00 22,154.75 S 479,909.12 502,367.12 503,512.12 624,968.12 625,337.45 626,725.24 627,318.69 631,885.69 643,452.69 665,607.44 Franklin, James Geyer, Robert Gibson, Marion Groomer, Michael Hansen, Karen Hayes, Lisa Hill, Leonard Howard, Richard J & S Research Jenkins, Frank 21,367.00 0.00 0.00 23,567.00 213.45 45,990.00 0.00 0.00 654.97 0.00 0.00 68,904.00 8,900.00 0.00 324.65 0.00 0.00 11,678.00 0.00 0.00 0.00 0.00 0.00 0.00 119.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 348.21 0.00 0.00 21,680.00 21,367.00 68,904.00 8,900.00 23,567.00 657.21 45,990.00 348.21 11,678.00 654.97 21,680.00 S 686,974.44 755,878.44 764,778.44 788,345.44 789,002.65 834,992.65 835,340.86 847,018.86 847,673.83 869,353.83 0.00 31,676.00 25,456.00 0.00 345.00 368.00 123,568.00 0.00 591,131.89 412,657.83 0.00 0.00 239.00 0.00 1,483.14 0.00 0.00 114.65 0.00 45,847.62 31,676.00 25,456.00 1,066.65 123,568.00 1,051,120.48 S 901,029.83 926,485.83 927,552.48 1,051,120.48 Jennings, Rocky Jensen, Deborah Kattelus, Sue Kelsey, Martin Totals this page 0.00 0.00 432.00 235.67 31-60 days 21-7 21,345.00 21,604.45 22,036.45 22,532.20 Oceanview Marine Company Accounts Receivable Listing December 31, 2012 Customer Name Totals from prior page Kessler, Henry Klaver, Earl Klinger, Max Kubczak, Antoni LaFave, Laura LaLonde, Jennifer 0-30 days 31-60 days 591,131.89 412,657.83 0.00 0.00 766.34 654.78 11,960.00 0.00 345.67 213.45 0.00 0.00 0.00 0.00 61-90 days 21-8 BC 2/05/2013 PBC 91-120 days Cumulative Total Total 1,483.14 23,645.00 324.65 0.00 11.64 0.00 0.00 45,847.62 0.00 0.00 0.00 0.00 214.68 8,965.00 1,051,120.48 23,645.00 1,745.77 11,960.00 570.76 214.68 8,965.00 1,051,120.48 1,074,765.48 1,076,511.25 1,088,471.25 1,089,042.01 1,089,256.69 1,098,221.69 Lantis, William Larson, Debra Laubauch, Ken Lee, Yang Little, Donna Marsh, Max Maurer, Stephen McCabe, Terry McCall, Joseph Mechem, William 214.67 114.67 45,076.00 116.45 432.11 318.27 0.00 21,643.00 5,865.00 0.00 356.94 219.43 0.00 235.89 325.67 0.00 0.00 0.00 0.00 0.00 158.90 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6,590.00 325.76 0.00 0.00 0.00 0.00 0.00 643.34 0.00 0.00 0.00 1,056.27 334.10 45,076.00 352.34 757.78 318.27 643.34 21,643.00 5,865.00 6,590.00 S 1,099,277.96 1,099,612.06 1,144,688.06 1,145,040.40 1,145,798.18 1,146,116.45 1,146,759.79 1,168,402.79 1,174,267.79 1,180,857.79 Meier, Diane Melbourne Corp. Murphy, James Nash, Dean Olin, Barry O'Connell, Daniel Peiffer, Jerrold Peoples, Jacquelyn Perkins, Terry Ramirez, Ramon 0.00 235.00 0.00 0.00 0.00 456.90 0.00 18,654.00 22,456.00 1,124.75 21,456.90 134.68 0.00 0.00 0.00 532.00 4,595.00 0.00 0.00 234.79 0.00 437.00 0.00 0.00 21,397.00 219.05 0.00 0.00 0.00 0.00 0.00 0.00 1,145.00 3,567.90 0.00 0.00 0.00 0.00 0.00 0.00 21,456.90 806.68 1,145.00 3,567.90 21,397.00 1,207.95 4,595.00 18,654.00 22,456.00 1,359.54 S 1,202,314.69 1,203,121.37 1,204,266.37 1,207,834.27 1,229,231.27 1,230,439.22 1,235,034.22 1,253,688.22 1,276,144.22 1,277,503.76 0.00 2,145.00 0.00 0.00 2,145.67 1,158.49 21,456.00 0.00 556.24 346.78 134.65 334.61 745,203.28 445,602.24 0.00 2,246.47 2,145.78 0.00 0.00 0.00 58,658.63 0.00 0.00 0.00 0.00 0.00 0.00 60,709.30 2,145.00 2,246.47 5,449.94 21,456.00 903.02 469.26 1,310,173.45 S 1,279,648.76 1,281,895.23 1,287,345.17 1,308,801.17 1,309,704.19 1,310,173.45 Ramsey, James Raymer, Lester Rose, Anna Ryan, Bernard Savalli, Karen Schmidt, Peter Totals this page Oceanview Marine Company Accounts Receivable Listing December 31, 2012 21-9 BC 2/05/2013 PBC Customer Name Totals from prior page Schroeder, Bruce Simmons, Carol Smith, Linda Southern Construction Spanos, Jim Steinbart, Paul Swain, Monte Sykora, Larry Taylor, Denzil Trotter, David Tuttle, Tom Underwood, John Warner, Wendy Wilcox, Laura 0-30 31-60 61-90 days days days 745,203.28 445,602.24 58,658.63 0.00 867.00 0.00 0.00 13,687.00 0.00 47,665.00 0.00 0.00 0.00 0.00 190,890.00 5,698.00 0.00 0.00 0.00 0.00 21,456.00 154.65 0.00 356.90 6,890.00 91-120 days 60,709.30 0.00 0.00 0.00 0.00 Cumulative Total 1,310,173.45 1,311,040.45 1,324,727.45 1,372,392.45 1,563,282.45 Total 1,310,173.45 867.00 13,687.00 47,665.00 190,890.00 0.00 0.00 46,895.00 41,567.00 11,321.00 0.00 214.60 0.00 213.92 0.00 0.00 0.00 0.00 0.00 0.00 0.00 124.60 46,770.00 0.00 0.00 0.00 13,654.00 0.00 0.00 0.00 0.00 369.40 0.00 0.00 0.00 5,698.00 13,654.00 46,895.00 41,567.00 11,321.00 21,456.00 863.25 46,770.00 570.82 6,890.00 S 1,568,980.45 1,582,634.45 1,629,529.45 1,671,096.45 1,682,417.45 1,703,873.45 1,704,736.70 1,751,506.70 1,752,077.52 1,758,967.52 S 1,760,091.52 Young, Gregory 0.00 0.00 0.00 1,124.00 1,124.00 Zelli, Arthur 0.00 2,590.48 0.00 0.00 2,590.48 827,423.83 562,958.24 296,443.23 75,856.70 1,762,682.00 F 21-15 F 21-15 TOTALS F 21-15 F 21-15 Tickmark Legend F = Footed without exception. CF = Cross-footed without exception. G/L =Agreed to general ledger without exception. S = Agreed to A/R subsidiary records without exception. Began with 5th account; selected every 10th account thereafter. F CF 21-1 1,762,682.00 G/L Oceanview Marine Company Calculation of Sample Size: Non-statistical Sampling December 31, 2012 21-17 WX02/24/2013 Decisions and Facts for Determining Sample Size: Book Value of the recorded population: 1,762,682.00 (86 accounts) Stratum 1: Book value of individually material accounts: (test all material accounts) 1,197,792.00 (14 accounts) Stratum 2: Book value of all remaining accounts (BV): (test only a sample) 564,890.00 Tolerable Misstatement (TM): 30,000.00 Assurance Factor (AF): 2.1 (from table below) n (stratum 2): 40 (round to whole number) Note: n = (BV x AF) / TM Assurance Factor for Determining Sample Size: (The assurance factor should be based on considerations of acceptable audit risk, inherent risk, control risk, results of preliminary analytical procedures, and the results of substantive tests of transactions) Assurance Factors Risk That Other Substantive Procedures Will Fail to Detect a Material Misstatement Assessment of Inherent and Control Risk Maximum Slightly below maximum Moderate Low Maximum 3.0 2.7 2.3 2.0 Slightly Below Maximum 2.7 2.4 2.1 1.6 Moderate 2.3 2.0 1.6 1.2 Low 2.0 1.6 1.2 1.0 Justify/explain your decision: Inherent risks for the existence and accuracy objectives for accounts receivable were assessed as medium. After performing tests of transactions for the sales and cash receipts cycle, control risks for the existence and accuracy objectives for accounts receivable were assessed as medium and low, respectively. Acceptable audit risk is medium. Results of substantive tests of transactions and analytical procedures were generally favorable, but risk that other procedures will fail to detect a material misstatement was set slightly below maximum since this is a first year audit. Other factors considered: Little anticipated misstatement in accounts receivable. Oceanview Marine Company Sample Selection: Non-statistical Sampling December 31, 2012 21-18 WX 02/24/2013 Audit Area: Accounts receivable Stratum 1: All accounts greater than tolerable misstatement of: Stratum 2: Sampling Interval = Number of Accounts / Sample Size = 30,000 2 (round down to whole number) Amount Confirmed Stratum 1: Customer Name 1 Anthony Underwriters 117,990.00 2 Bischoff, John 113,655.00 3 Borst, Robert 155,690.00 4 Devine, Dan 121,456.00 5 Geyer, Robert 68,904.00 Various 620,097.00 6 to 14 Total 1,197,792.00 Amount Confirmed Stratum 2: Customer Name (Random Starting Point: 1st account) 1 James Abbott 21,345.00 2 Allen, Robert 432.00 3 Beatty, Lonnie 21,390.00 4 Binkowski, Alex 1,349.02 5 Chappelle, Daniel 24,678.00 Various 292,641.14 6 to 35 Total 361,835.16 Oceanview Marine Company Evaluation of A/R Confirmations: Non-statistical Sampling December 31, 2012 21-19 WX02/24/2013 Stratum 1--Summary of Confirmation Differences: A/R Balance per Customer Amount of Difference Robert Brost 155,690.00 0.00 155,690.00 0.00 John Underwood 46,770.00 47,660.00 -890.00 -890.00 Customer Name Reason(s) for Difference Amount of Client Misstatement, if any Over (Under) A/R Balance per Client's Records 0.00 0.00 Net misstatement in stratum 1: Stratum 2--Summary of Confirmation Differences: Reason(s) for Difference -890.00 Amount of Client Misstatement, if any Over (Under) Customer Name A/R Balance per Client's Records A/R Balance per Customer Amount of Difference Rick Howard 11,678.00 11,561.00 117.00 117.00 Diane Meier 21,456.90 19,256.90 2,200.00 2,200.00 Paul Steinbart 13,654.00 16,354.00 -2,700.00 -2,700.00 0.00 Net misstatement in stratum 2: -383.00 -1,273.00 total understatement Oceanview Marine Company Evaluation of A/R Confirmations: Non-statistical Sampling (continued) December 31, 2012 21-20 WX02/24/2013 Calculation of Projected Misstatement: Stratum 1 Projected Misstatement: Net misstatement in stratum 1 = -890.00 (misstatements are not projected since tested 100%) Stratum 2 Projected Misstatement: (net misstatement in stratum 2/stratum 2 $ sample size) x (stratum 2 $ population size) = -685.63 Total projected misstatement = -1,575.63 Tolerable misstatement = 30,000.00 Less: Projected misstatement = 1,575.63 Allowance for sampling error = 28,424.37 Calculation of Actual Allowance for Sampling Error*: Oceanview Marine Company Evaluation of A/R Confirmations: Non-statistical Sampling (continued) December 31, 2012 21-21 WX02/24/2013 Decision (check one): Accept population as stated. (No adjustment required for account to be fairly stated.) x Request client to adjust population. (Account is not fairly stated, but if client corrects misstatements found in sample, account will be acceptable.) Expand audit tests. (Account is not fairly stated, and cannot be made acceptable by correcting misstatements found in sample.) Some other action. Specify: Explain/justify your decision: The account receivable is still having unadjusted project misstatement $73424.37. But tolerable misstatement is 30000. According to the test data we will expand audit tests as well. Conclusion: According to the tests and Summary of possible misstatement data, Identified materials is -$38073. Calculation of Unadjusted Projected Misstatement: Projected misstatement = 75,000.00 Less: Adjusting journal entry (net) = 1,575.63 Unadjusted projected misstatement = 73,424.37 (carry forward to Summary of Possible Misstatements (workpaper 90-1)) OCEANVIEW MARINE COMPANY Inventories Leadsheet 22-1 December 31, 2012 WX 02/25/2013 2012 Balance Account Number and Name 2205 Inventory, Boats W/P 22-8 - 22-10 Net Adjustments 2012 Adjusted Balance 2011 Balance % Change (before adjustment) 13,167,170 G/L 0.00 0.00 12,030,247 PY 9.45% 2210 Inventory, Repair Parts 200,390 G/L 0.00 0.00 182,983 PY 9.51% 2215 Inventory, Supplies 156,789 G/L 0.00 0.00 143,170 PY 9.51% 12,356,400 F 9.45% Total 13,524,349 F 22-10 Tickmark legend G/L Agreed to general ledger. PY Agreed to prior year's workpapers. F Footed without exception. Oceanview Marine Company Audit Program Inventories (continued) December 31, 2012 * AUDIT PROCEDURES 22-6 WX 02/25/2013 W/P INIT 29. Select items of inventory and: (a) review and note current selling prices and quantities sold. (b) compare the inventory carrying amounts and recent selling prices for the selected items and ascertain that the carrying amounts are not in excess of net realizable value, (c) compare quantities on hand for selected items with quantities noted per recent sales invoices and customer orders to determine if inventories appear reasonable in relation to requirements. 30. Inquire of employees and management concerning obsolete inventory, and be alert for items that are damaged, rust- or dust-covered, or located in inappropriate places. A BC RV 1-Feb 22-11 price is significantly higher than cost. BC Rv A COMMENTS Done for same sample as test counts. In each case the selling Noted two boats sold early in Jan. (#8062 and #8316). Both sold for more than cost. BC Inventory turnover ratios have been consistent for several years. Sales volume is up slightly, so slight increase in inventory is reasonable. BC Discussed with Arvin Phillips. List of obsolete inventory prepared. Includes damaged, outdated, and unrepairable items. BC No exceptions found. 22-8 31. Obtain the client's Final Inventory Listing and verify additions and extensions on the listing. to D 22-10 32. Trace from: (a) inventory count sheets to final inventory listing, and, A Co (b) final inventory listing to inventory count sheets. AE 33. Select a sample of inventory items on the Final Inventory Listing and compare the inventory prices with prices per recent vendors' invoices, price lists, or published quotations. A Other procedures: Compare client final listing to count sheets. date have been excluded from inventory, goods received after the cutoff date have been excluded from inventory, and goods shipped after the cutoff date have been included in inventory. *Audit Objectives: Accuracy Existence Classification Completeness Cutoff Presentation and disclosure Realizable value Detail tie-in Rights and obligations A Cu 22-8 to 22-10 22-12 to 22-14 BC BC In separate file. Oceanview Marine Company Audit Program Inventories (continued) December 31, 2012 22-7 WX 02/25/2013 * W/P INIT E AUDIT PROCEDURES 2-1 BC COMMENTS ANALYTICAL PROCEDURES 34. Test the reasonableness of inventory by: (a) Comparison with prior years, (b) Application of the gross margin percentage method, Year-end balance is up by 9.5%, but sales are up by 15.6% Co A No significant variance from prior years. (c) Computing the rate of turnover, (d) Reference to capacity of storage facilities. No unusual variance. 35. Compare gross profit percentage, by product line if possible, of current year to prior year; obtain explanations for significant variances. E Co A BC Other procedures: BC None STATEMENT PRESENTATION 36. Verify basis of inventory valuation is clearly stated. 37. Verify that any changes in the basis of valuation are stated. Other procedures: CONCLUSION 38. State, in your opinion, if the inventory reported in the financial statements is fairly presented and is in accordance with GAAP. *Audit Objectives: Accuracy Classification Detail tie-in Existence Completeness Cutoff Presentation and disclosure Realizable value and obligations Rights P BC P BC BC No changes None Oceanview Marine Company Inventory Tests: Completeness and Existence As at December 31, 2012 From count sheets: 8111 22-15 WX 02/25/2013 Results/discrepancies noted: Select every tenth item from the count sheets (w/p 22-12 to 22-14), starting with stock #8111 and agree to final listings. From final listings: Select every tenth item from final listings (w/p 22-8 to 2210), starting with stock #8009 and agree to the count sheets. Results/discrepancies noted: Oceanview Marine Company Results of Inventory Pricing Tests: Non-statistical December 31, 2012 22-18 WX 02/25/2013 Summary of Misstatements: Boat Stock Number Recorded Inventory Amount Amount per Vendor's Invoice Amount of Difference Reason(s) for Difference 0.00 0.00 Net misstatement in sample = Calculation of Projected Misstatement: Net misstatement in sample x Population size (in $) / Sample size (in $) = Calculation of Allowance for Sampling Error: Tolerable misstatement less: Projected misstatement equals: Allowance for sampling error Amount of Client Misstatement, if any Over (under) Oceanview Marine Company Results of Inventory Pricing Tests: Non-statistical December 31, 2012 22 - 19 WX 02/25/2013 Decision (check one) Accept population as stated (No adjustment reqiured for account to be fairly stated) Request client adjust population (Account is not fairly stated,but if client corrects misstatement found in sample, account will be accepted.) Expand audit test (Account is not fairly stated, and cannot be made acceptable by correcting misstatement found in sample.) Some other action. Specify: Explain / Justify your Decision: Oceanview Marine Company 22-20 Results of Inventory Pricing Tests: Non-statistical (continued) As at December 31, 2012 WX 02/25/2013 Conclusion: 30-1 Oceanview Marine Company Accounts Payable Leadsheet December 31, 2012 Accounts Number and Name 2010 - Accounts payable 30-10 Tickmark legend G/L Agreed to general ledger PY Agreed to prior year's workpapers 2012 Balance 1,750,831 G/L Net Adjustments 2012 Adjusted Balance 1,750,831 WX 02/25/2013 2011 Balance 1,403,247 PY % Change (before adjustment) 24.77% Oceanview Marine Company Adjusting Journal Entries: Accounts Payable December 31, 2012 Accounts Number and Name 1520 Equipment-Boat crane 2010 Accounts payable - trade To record acquisition of boat crane from Lift King. 6020 Advertising Expense 2010 Accounts payable - trade To record Christmas advertising campaign for Nov and Dec 2012 Debit 30-2 WX02/25/2013 Credit Oceanview Marine Company Audit Program - Accounts Payable (continued) December 31, 2012 Audit Procedures 4 Obtain list of cash disbursement after year end to perform search for unrecorded liabilities and tests of year-end payables balances: a. Determine sample size for testing; * 30-4 WX 02/25/2013 W/P BC 30-11 to 30-19 BC A Co Ro INIT COMMENTS 30-20 b. Select sample items for testing; c. Trace amounts representing accounts payable at year-end to listing of accounts payable d. Evaluate and summarize and payments representing potential omissions or misstatements of year-end accounts; e. Generalize misstatements to populations and evaluate acceptability of the population ANALYTICAL PROCEDURES 5 Compare accounts payable and accrued liabilities in the current year to prior years and obtain explanations for significant differences E Co A BC 6 Determine if groupings are consistent with previous periods. P BC 7 Reclassify and debit balances A P BC None P BC Done Increase due to higher volume and increased inventory STATEMENT PRESENTATION 8 Verify that accounts payable is classified as a current liability on the balance sheet * Audit Objectives: Accuracy Classification Completeness Cutoff Presentation and disclosure Right and obligations Detail tie-in Existence Yes. Consistent Oceanview Marine Company Audit Program - Accounts Payable (continued) December 31, 2012 Audit Procedures CONCLUSION 9 State, in your opinion, if the accounts payable balance reported in the financial statements is fairly presented and is in accordance with GAAP. 30-5 WX 02/25/2013 Oceanview Marine Company Sample Selection: Non-statistical Sampling - A/P December 31, 2012 30-21 WX02/25/2013 Audit Area: Accounts payable - Tests of subsequent cash disbursements Describe Sample Selection Method: Stratum 1: All cash disbursements greater than tolerable misstatement of $30,000. Stratum 2: Sample of all remaining cash disbursements (