Introduction Apollo Shoes, Inc. is an audit case designed to introduce you to the entire audit process, from planning the engagement to drafting the final report. You are to assume the role of a staff auditor at Anderson, Olds, and Watershed (AOWICPAs and work on the financial audit of a client, Apollo Shoes, Inc. This assignment focuses on the planning process of the audit. This assignment contains various communications from the Darlene Wardlaw, Engagement Manager at AOW CPAs. Each communication contains certain assignment requirements highlighted in bold. The documents mentioned in the Attachments section of a communication are available in the Content area of D2L in Apollo Shoes module. The information in this assignment is sequential in nature. In other words, pay close attention to information disclosed early in the audit (for example, in the Board of Directors' meeting minutes) as it may play a role in subsequent audit work contained in other assignments. Limitations of the case: While the case is as realistic as possible, you are unable to follow up directly with client personnel. Therefore, you will have to rely on evidence provided to you through D2L. in an actual audit, you would be able to inquire, observe, and otherwise follow-up on any questions that you have until you feel comfortable relying on the evidence. Also, to make sure that the case can be completed in a reasonable amount of time, most of the audit sampling is already done for you Understand that audit sampling plays a large role in actual audit practice and you might have to be directly involved with the sampling procedures. WP index # A11 Apollo Shoes, hec Preclosing Trial Balance (audited) As of the year end December 31, 2016 Prepared by: Reviewed by: H DW Date 4152018 918/2018 AccouD Account Description Debit Art Credit Anot 1,987.28 198,116.52 3,44,958.13 16,410,902.71 1,262,819.88 18,825,215.24 3,012,000.00 743,314.38 200,000.00 7,406.82 117,000.00 623,915.92 433,217.10 163,500.00 572,691.18 53,840.59 4,633,118.09 29,470.32 1,318.69 583.99 6,033.01 2,815.47 10100 Cash on Hand 10200 Regular Checking Account 10300 Payrol Checking Account 10400 Savings Account 11000 Accounts Receivable 11400 Other Receivables 11500 Alowance for Doubtft Accounts 12000 Inventory - Spotlight 12300 Reserve for hventory Obsolescence 14100 Prepaid Insurance 14200 Prepaid Rent 14300 Office Supplies 14400 Notes Receivable-Cument 14700 Other Current Assets 15000 Land 15100 Buildings and Land Improvements 15200 Machinery, Equipment, Olice Furniture 17000 Accum. Depreciation 19000 Ivestments 19900 Other Noncurrent Assets 20000 Accounts Payable 23100 Sales Tax Payable 23200 Wages Payable 23300 FICA Employee Withholing 23350 Medicare Withholding 23400 Federal Payroll Taxes Payable 2X500 FUTA Tax Payable 23600 State Payroll Taxes Payable 23700 SUTA Tax Payable 23900 FICA Employer Withholfing 23900 Medicare Employer Withholding 24100 Line of Credit 24200 Current Portion Long-Term Debt 24700 Other Cument Liabities 27000 Notes Payable Noncurrent 39003 Common Stock 39.014 Paid in Capital 39005 Retained Eamings 40.000 Sales 41000 Sales Retums 42000 Warranty Expense 45000 Income from Westments 46000 Interest Income 47000 Miscellaneous Income 50000 Cost of Goods Sold 57500 Freight 60000 Advertising Expense 61000 Auto Expenses 62000 Research and Development 64000 Depreciation Expense 64500 Warehouse Salaries 65000 Property Tax Expense 66000 Legal and Professional Expense 67000 Bad Debt Expense BEIDD Insurance Expense 70000 Maintenance Expense 70100 U ties 70110 Phone 70120 Postal 71000 Miscellaneous Ofice Expense 72000 Payroll Tax Exp 7200 Pension Profi-Sharing Plan Ex 74000 Rent or Lease Expense 77500 Administrative Wages Expense 78000 Interest Expense 78500 Income Tax Expense - Federal 78510 Income Tax Expense - State 80000 Loss on Legal Settlement 1,318.69 583.99 10,000,000.00 8,105,000.00 7,423,000.00 2,219,620.65 246,172,918.44 4,497,583.20 1,100,281.48 214,302.81 141,569,221.61 4,312,951.46 897,140.01 218,974.39 31,212,334.17 133,000.00 4,633,383.82 80,495.32 3,605,133.96 1,622,425.99 853,942.65 61,136.14 135,642.99 76,373.78 128,033.21 17,023.27 1,550,989.06 3,000,000.00 2,603,485.87 16,875,305.98 875,000.00 2,365,000.00 429,000.00 19,172,000.00 283,238,404.03 283,238,404.03 WP index # Apollo Shoes, ac Preclosing Trial Balance ( dited) As of the year end December 31, 2017 Prepared by: Reviewed by: AccouD Account Description Debit Amount Credit Amount 2,275.23 557,125.92 3,645,599.15 51,515,259.98 1,250,000.00 1,239,009.75 67,724,527.50 846,000.00 3,424,213.78 8,540.00 117,000.00 674,313.92 2,929,197.13 619,500.00 1,998,780.39 53,840.59 1,922,095.91 8,439.65 11.414.99 118,696.12 55,106.86 10100 Cash on Hand 10200 Regular Checking Account 10300 Payrol Checking Account 10400 Savings Account 11000 Accounts Receivable 11400 Other Receivables 11500 Allowance for Doubtful Accounts 12000 nentory 12300 Reserve for hventory Obsolescence 14100 Prepaid Insurance 14200 Prepaid Rent 14300 Office Supplies 14400 Notes Receivable-Cument 14700 Other Current Assets 15000 Land 15100 Buildings and Land Improvements 15200 Machinery, Equipment, Ollice Fumiture 17000 Accum. Depreciation 19000 Ivestments 19900 Other Noncurrent Assets 20000 Accounts Payable 23100 Sales Tax Payable 23200 Wages Payable 23300 FICA Employee Withholing 23350 Medicare Withholding 23400 Federal Payroll Taxes Payable 2X500 FUTA Tax Payable 23600 State Payroll Taxes Payable 23700 SUTA Tax Payable 23900 FICA Employer Withholfing 23900 Medicare Employer Withholding 24100 Line of Credit 24200 Current Portion Long-Term Debt 24700 Other Cument Liabities 27000 Notes Payable Noncurrent 39003 Common Stock 39.014 Paid in Capital 39005 Retained Eamings 40.000 Sales 41000 Sales Retums 42000 Warranty Expense 45000 Income from Westments 46000 Interest Income 47000 Miscellaneous Income 50000 Cost of Goods Sold 57500 Freight 60000 Advertising Expense 61000 Auto Expenses 62000 Research and Development 64000 Depreciation Expense 64500 Warehouse Salaries 65000 Property Tax Expense 66000 Legal and Professional Expense 67000 Bad Debt Expense BEIDD Insurance Expense 70000 Maintenance Expense 70100 U ties 70110 Phone 70120 Postal 71000 Miscellaneous Ofice Expense 72000 Payroll Tax Exp 7200 Pension Profi-Sharing Plan Ex 74000 Rent or Lease Expense 77500 Administrative Wages Expense 78000 Interest Expense 78500 Income Tax Expense - Federal 78510 Income Tax Expense - State 80000 Loss on Legal Settlement 8,439.65 11,414.99 44,403,000.00 12,000,000.00 8,105,000.00 7,423,000.00 6,590,983.64 242,713,452.88 11,100,220.89 1,158,128.47 1,426,189.31 131,881.46 2,166,000.00 130, 196,645.26 4,240,263.09 1,036,854.01 210,512.80 528.870.44 446,000.00 4,720,715.56 99,332.45 4,913,224.45 36,106.92 35,512.87 137.332.18 52,599.02 77,803.61 24,891.82 1,577.811.85 3,300,000.00 1,206,574.00 16,197,225.43 2,591,736.50 8,900,000.00 3,100,000.00 329,788,915.21 329,788,915.21 PART 3: Conduct preliminary analytical procedures using the template provided. Mark the accounts you believe have significantly changed from 2016 to 2017 with an "X". (20 points) Date: 16 JAN 2018 10:44:22 +0000 From: 'Darlene Wardlaw" >> I need you to perform preliminary analytical procedures on the financial statements. A Create comparative common-size financial statements showing percent changes in the dollar values from 2016 to 2017 (A3.1 and A3.2). Again, just follow the template provided. Like before, be careful about the calculations as I did not validate the integrity of some formulas. If you find any significant changes, mark them (Xso that we can examine the marked accounts when we perform the audit. B Calculate financial ratios (A3.3). Use the template provided. DW Apollo Shoes, Inc Analytical Procedures Common Size come Statement 1281/2017 Acct. Change Accot Title WP Ret 12/31/2016 Audited 1211/2017 haudited REVENUE % 40000 Sales 41000 Sales Retums 420.00 Warranty Expense A21 A2.1 A2.1 #**********# 4,497,583.20) (1,100,281.48) 102* 2% 0% #*********** (11,100,220.89) (1,158,128.47) 105% 53 1% (3,459,465.56) (6,612,637.69) (57.846.99) 0% OX 09 0% 100% Net Sales #EEEEEEEE **********# 100% (10,119,950.24) 0% COST OF GOODS SOLD A2.1 #***** #4444 AVALUE #VALUE AVALE PVALUE #VALUE. #***** **** Total CGS Gross Mary 0% 100% S 0% 100% ECARE ********** (10,119,950.24) 0% OPERATNG EXPENSES #***## ****** ****** #***** A2.1 A2.1 A21 A2.1 A2.1 A2.1 A2.1 A21 A2.1 ****** ****** A2.1 #VALUE AVALE. AVALUE. #VALUE #VALUE #VALUE. AVALE PVALUE #VALUE #VALUE #VALUE #VALUE #VALUE #VALUE #VALUE PVALUE PVALUE #VALUE #VALUE. #VALUE PVALUE #4444 #***** #***** #******* A21 A21 A21 A21 A2.1 A2.1 A2.1 A2.1 N21 ****** ****** **** #******* #***** Total Operating Expenses Het come from Operations OX 100% # E E 100% ************* (10,119,950 24) 0% OTHER COME (EXPENSE) A2.1 A2.1 A21 A2.1 A2.1 #VALUE #VALUE PVALUE #VALUE #VALUE #***** #***** ****** ****** ****** PVALUE #VALUE #VALUE 0% 02 0% Total Other become Expenses) Nethcome before Tax #VALUE NALE #VALUE NALE PVALUE NALE 09 **** ****** TAXES A21 A2.1 #VALUE AVALE #VALUE #VALUE PVALUE. #VALUE 0% - 0% ***** ****** 0% ****** *** Toh Tanes Nethcome AVALE PVALUE AVALUE MALLE PVALUE. NALE Apollo Shoes, hoc Analytical Procedures Selected Ratios 1281/2017 Audited 120182016 hedited 1281/2017 Percentage Change Asset Tumover Current Ratio Days Sales in AR Days Salles in hventory Debt Ratio Debt Equity Ratio Liability Tumover Net Working Capital