INTEGRATED CASE APPLICATION- PINNACLE MANUFACTURING: PART VI 16-37 (OBJECTIVES 16-1, 16-3, 16-0) In Parts IV. V. and VI of this case study, you were a to apply concepts we have discussed in previous chapters related to the sales and collec- tion cycle to the acquisition and cash disbursement cycle. Parts IV, V, and dealt with obtaining an understanding of internal control and assessing control risk for transactions affecting accounts payable of Pinnacle Manufacturing In Part VII, you will design substan- tive analytical procedures and design and perform tests of details of balances for accounts payable Assume that your understanding of internal controls over acquisitions and cash dis ts and the related tests of controls and substantive tests of transactions support assessment of a low control risk. The listing of the 519 accounts making up the ac- counts payable balance of $12.969.686 at December 31, 2016, is available online. Required a. List those relationships, ratios, and trends that you believe will provide useful infor mation about the overall reasonableness of accounts payable. You should consider t Sccounts that affect accounts payable in selecting the analytical procedures b. Study Table 18-5 aining balance-related audit objectives and tests of de- tails of balances for accounss payable to be sure you understand each procedure and n for accounts payable in a performance format audit procedures in Table ) 8-5. The format of the audit program should be ssume for requirement b, that () assessed control risk had been high rather than similar to Table 16-5 (p 546). Be sure toinchude a sample size for each procedure. low for each transaction-related audit objetiye balance-related audit objective, and (3) analyt .12 inherent risk was high for each lures indicated a high poten- tial for misstatement. What would the effect have been on the audit procedures and sample sizes for requirement b? firmation requests were sent to a stratified sample of 51 16-8. Confirmation responses from 45 vendors were returned d. Con listed in Figure ence betwen the vendor's and the company's records. Figure 16-9 (p 560) presents that indicate a difference between the vendor's balance and the com- pany's records. The auditor's follow-up findings are indicated on each reply. Prepare an audit schedule similar to the one illustrated in Figure 16-10 (p, 562) to determine the misstatements, if any, for each difference. The audit schedule format shown in ure 16-10 is available online. The exception for Fiberchem is analyzed as an il ration. Assume that Pinnacle Manufacturing took a complete physical inventory at December 31, 2016, and the auditor concluded that recorded inventory reflects all inventory on hand at the balance sheet date. Include the balances confirmed without as one amount on the schedule for each stratum, and total the schedule exception e. Estimate the total misstatement in the income statement, not just the misstatements based on the income statement misstatements you identified in re- quirement d. The total misstatement should include a projected misstatement and an estimated allowance for sampling risk. Hint: See pages 241-243 for guidance on calculating the point estimate. Note that the misstatements should be projected sepa- rately for each stratum. You will need to determine the size of each stratum using the counts payable listing Use your judgment to estimate sampling risk, considering in the samp the size of the population and the amounts tested f. Estimate the total misstatement in accounts payable in the same way you did for the income statement in requirement e. Hint A misstatement caused by the failure to record an FOB origin purchase is an understatement of accounts payable and inven- tory and has no effect on income. INTEGRATED CASE APPLICATION- PINNACLE MANUFACTURING: PART VI 16-37 (OBJECTIVES 16-1, 16-3, 16-0) In Parts IV. V. and VI of this case study, you were a to apply concepts we have discussed in previous chapters related to the sales and collec- tion cycle to the acquisition and cash disbursement cycle. Parts IV, V, and dealt with obtaining an understanding of internal control and assessing control risk for transactions affecting accounts payable of Pinnacle Manufacturing In Part VII, you will design substan- tive analytical procedures and design and perform tests of details of balances for accounts payable Assume that your understanding of internal controls over acquisitions and cash dis ts and the related tests of controls and substantive tests of transactions support assessment of a low control risk. The listing of the 519 accounts making up the ac- counts payable balance of $12.969.686 at December 31, 2016, is available online. Required a. List those relationships, ratios, and trends that you believe will provide useful infor mation about the overall reasonableness of accounts payable. You should consider t Sccounts that affect accounts payable in selecting the analytical procedures b. Study Table 18-5 aining balance-related audit objectives and tests of de- tails of balances for accounss payable to be sure you understand each procedure and n for accounts payable in a performance format audit procedures in Table ) 8-5. The format of the audit program should be ssume for requirement b, that () assessed control risk had been high rather than similar to Table 16-5 (p 546). Be sure toinchude a sample size for each procedure. low for each transaction-related audit objetiye balance-related audit objective, and (3) analyt .12 inherent risk was high for each lures indicated a high poten- tial for misstatement. What would the effect have been on the audit procedures and sample sizes for requirement b? firmation requests were sent to a stratified sample of 51 16-8. Confirmation responses from 45 vendors were returned d. Con listed in Figure ence betwen the vendor's and the company's records. Figure 16-9 (p 560) presents that indicate a difference between the vendor's balance and the com- pany's records. The auditor's follow-up findings are indicated on each reply. Prepare an audit schedule similar to the one illustrated in Figure 16-10 (p, 562) to determine the misstatements, if any, for each difference. The audit schedule format shown in ure 16-10 is available online. The exception for Fiberchem is analyzed as an il ration. Assume that Pinnacle Manufacturing took a complete physical inventory at December 31, 2016, and the auditor concluded that recorded inventory reflects all inventory on hand at the balance sheet date. Include the balances confirmed without as one amount on the schedule for each stratum, and total the schedule exception e. Estimate the total misstatement in the income statement, not just the misstatements based on the income statement misstatements you identified in re- quirement d. The total misstatement should include a projected misstatement and an estimated allowance for sampling risk. Hint: See pages 241-243 for guidance on calculating the point estimate. Note that the misstatements should be projected sepa- rately for each stratum. You will need to determine the size of each stratum using the counts payable listing Use your judgment to estimate sampling risk, considering in the samp the size of the population and the amounts tested f. Estimate the total misstatement in accounts payable in the same way you did for the income statement in requirement e. Hint A misstatement caused by the failure to record an FOB origin purchase is an understatement of accounts payable and inven- tory and has no effect on income