Page 1 of 3 SOURCE: AUDIT 1997 EXAMS #3 - QUESTION Number 3 (20 points - approximately 54 minutes) Miller, CPA, is engaged to audit the financial statements of Superior Wholesaling for the year ended December 31, 1996. Miller obtained and documented an understanding of Superior's internal control relating to accounts receivable and nssessed control risk relating to accounts receivable at the maximum level. Miller requested and obtained from Superior an aged accounts recivable schedule listing the total amount owed by each customer as of December 31, 1996, and sent positive confirmation requests to a sample of the customers. Subsequently, Miller tested the accuracy of the aged accounts receivable schedule. Miller has asked Adler, the staff assistant assigned to the engagement, to follow up on the eight returned confirmations that appear on the following two pages. Assume that each confirmation is material if the potential misstatement is projected to the population. Required: a. Describe the procedure(s), if any, that Adler should perform to resolve each of the eight confirmations that were returned. Assume that Superior will record any necessary adjusting entries and that Adler will verify that they are appropriate. b. Assume that Miller sent second requests for accounts receivable balances initially selected for confirmation for which no responses were received. Describe the alternative substantive procedures that Miller should consider applying to the accounts receivable sclected for confirmation for which no responses were received to Miller's second requests. Assume that these accounts receivable in the aggregate, when projected as misstatcinents to the population, would affect Miller's decision about whether the financial statements are materially misstated. c. In addition to performing the confirmation procedures and alternative procedures described in requirements a and b and the procedures described in one first paragraph above, what additional substantive procedures should Miller consider performing to complete the audit of Superior's accounts receivable and related allowances? Assume that all accounts reccivable are trade receivables. Dec 2663 wararlaataste imes Algo, USA Bay 15,2997 Baker 21 Lane De Confirm 128 Crneral, LASA Dear Our mother. Millet, CPA, sowego facial To ficcate spletni telece de w of December 31, 1996, which is shows ESAM. Indices de space below whers in with you. If there to pre povide my Info that we willing me cice Please all your directly to Mi, A. Asif cepe is enclosed for your convenience. Sincent 2. 3.ht, Commer Superior Wholesalin. loc. To Maier, CPA: The downs COM December 31, 1996 Cap as follow 25.09. Street The Hedersdrehe Retrohen 1997 Nint Breedte Are Du SOURCE: AUDIT 1997 EXAMS 3 - QUESTION Superior Wal, Inc. 123 Celine A, USA July 25, 1997 AC Na Stre Confinn 11 A, USA Dear CLA Our ww, Miller, CPA, hy word our financial . To faciliteite balance de of Drober 31, 198, wald hown ou ew recordos SES.OO Intimin e pace below whether this is in agree with your cord. If here are excepcion, please provide lafond the wilde la recolle dhe die Pinse mall your reply diedy to Miller, CPA. And addressed care le cod for your cover Sincerely, 2. Make J. meke, Superior Wholesale, Inc. To Mler, CPA The town above is of December 31, 19%. Categrats tollow Yes watered ISO e of technical Mercedes C Sedef SIS. Nac_CLAAP cheer Nele te filter Make in that the check wall received and depend on 12/21/36, ured the wrong mer CM Superior Walling, Ine. 123 Cecamercial Dent Autow, USA Janney 18, 19 Clark Real 35 LAW Confirm 134 Jackson, LISA Dear J.P. Cum Our ador. Miller, CPA, is currendy adidas our financial a. To facile idi.please confine the balance de us as of December 31, 1996, which is shown on our seconds as $17.00. Indicate in the space below whether this is la agreement with your records. There are exception, please provide any Information that will as the sodir i cacing the difference Please tull your reply directly to Mer, CPA. A amped, sef addressed covelope is enclosed for your convenience. Sloverely. J. Fake J. 20, Congole Superior Wholding, Inc. To Me, CA: The shown above is COTEC s ef December 31, 1996, except as follows: Icrcce.Atencion Superiore DINAKHTAGRANITE Nume J. Cum et Policea Pred Date 1/1997 Superior Wholesale, loc. 123 Code E Anylowe, USA Samay 15, 1997 Dell Ouderer, Inc. Sunshine Mer Confirm 141 hvery, Dear DER Our wedoor, Mines, CPA, ki med seg facial To free confirm the balance us as of December 31, 1995, which is records SA.. Inilatespacedow where is a with your needs. If there are con le provide any Information that will sist the decidit dhe difference en mail your reply directly to MC. A stamped, adused vloe is caclosed for your de Sicerely, 3. Blake, Controller Superior Wholesaling, Inc. To Me, CPA The shown above is connect as of December 31, 1996, creep as follows Neal Seemised these in der Deo WLY Tresche centietharder De Ne De Position General Manager Dute Jos. Ir SOURCE: AUDIT 1997 EXAMS - QUESTION Pere 3 of 3 Superior W. Iac. 123 Comercial Antown, USA Jawy 15.1997 Franca. 27 Street Confira 167 Justy C, USA Dear S. ZOR: Ordi. Miller, CPA, king out facial Siements. To facilitis please cont balance du us as of December 31, 1986, which is shower code S6.000. Indicate in die space blow disagreement with your records are repase provide any Information that will assist the air is receiling the eference Picanto mail your reply direly s Miller, CTA. A mepet, dressed envelopes en Sor your convenience Secondly. J. Make J.blake, Controller Superior Wholesaling, Inc. To Mile, CPA The amount shown above seas e December 31, 1996, except follows: Seperior Wholesaling, loc. 123 Commercial Blvd. Anylon, USA Juary 15, 1997 Kaple Distrer 2700 Occo Sherehe Confirm 58 Ocean Clo, USA Dear 7. Enple Our whic, Miller, CPA, Is custody wding our financial time. To facilite luis sed, please confirm the balance de was of December 31, 1996, which show on our cordas 559.00 Indicate in the space below whether is in apoca with you records. If there me exceptions, please provide any Islom that will assistito in reconciling the difference Meuse mail your reply directly to Miller, CPA. A suamped, self- addressed covelapels caclosed for your convenience. Sincerely, J. Blake J. Dhe, Controller Superior Wholesaling, Inc. To Matr, ! The most shown above is gerect as of December 31, 1996, Except as follows: Cecht individuelle 350.000. Superior Lee Lehehehe Name Earle Position de Tale 120.92 Superler Wholesaling, Inc. 123 Commercial Elvd. Auto, DISA January 15, 1997 Grow Rang 3838 Crit Confira #71 Le Center, USA Dear I. G: Our edir, Miller, CPA is currently auditing our facial statements. To facite this audit, please confirm the balance de of December 31, 1996, which is shown her records as 525.X. Indicale in die pace below whether this is in agreement via your scords. I there are exceptions, please provide any Information that will die saditor is reconciling the difference Picie mall your reply directy to Miller, CPA, A stamped, self adrese cavcope is enclosed for your convenience. Sincerely, 2. Make 1. Make Cuer Superior Wholesale lat. To Miller, CPA: The amount shown where it CTO as of December 31, 1996, extga oli Other chefer $28.00 den 17:25 Mae L. Gas Potion Controller Date 2/22/97 Price Date Note do file: This conformation par med by the poral service are defender och andra location C Miller Superior Wholesaling, Inc. 123 Comerciale Anyt, USA Summary 15, 1997 Haller, Inc. SS Green Street Confirm 186 Granly, 284 Dear. Ne Our wadisor, Miller, CPA, scrie cor final ca. Te faciles, please coin de lance de us as of December 31, 1996, which is shown on records as 51.00. Indicates the pace below whether is a greement wide your records, there are please provide my information ont will in telling the diffonce. Please mail your reply directo Miller, CPA. Asped, addressed envelope is called for your co. Sincerely, J. Hale 3. Blake, Controlar Superior Wholesaling, lo To Miler, CPA: The shown above is on December 31, 1996, catepes follows: Maithe check for 1:47 merchandise.de 12-23-25 Muins Mines Politic Aco De 3-18-27 Page 1 of 3 SOURCE: AUDIT 1997 EXAMS #3 - QUESTION Number 3 (20 points - approximately 54 minutes) Miller, CPA, is engaged to audit the financial statements of Superior Wholesaling for the year ended December 31, 1996. Miller obtained and documented an understanding of Superior's internal control relating to accounts receivable and nssessed control risk relating to accounts receivable at the maximum level. Miller requested and obtained from Superior an aged accounts recivable schedule listing the total amount owed by each customer as of December 31, 1996, and sent positive confirmation requests to a sample of the customers. Subsequently, Miller tested the accuracy of the aged accounts receivable schedule. Miller has asked Adler, the staff assistant assigned to the engagement, to follow up on the eight returned confirmations that appear on the following two pages. Assume that each confirmation is material if the potential misstatement is projected to the population. Required: a. Describe the procedure(s), if any, that Adler should perform to resolve each of the eight confirmations that were returned. Assume that Superior will record any necessary adjusting entries and that Adler will verify that they are appropriate. b. Assume that Miller sent second requests for accounts receivable balances initially selected for confirmation for which no responses were received. Describe the alternative substantive procedures that Miller should consider applying to the accounts receivable sclected for confirmation for which no responses were received to Miller's second requests. Assume that these accounts receivable in the aggregate, when projected as misstatcinents to the population, would affect Miller's decision about whether the financial statements are materially misstated. c. In addition to performing the confirmation procedures and alternative procedures described in requirements a and b and the procedures described in one first paragraph above, what additional substantive procedures should Miller consider performing to complete the audit of Superior's accounts receivable and related allowances? Assume that all accounts reccivable are trade receivables. Dec 2663 wararlaataste imes Algo, USA Bay 15,2997 Baker 21 Lane De Confirm 128 Crneral, LASA Dear Our mother. Millet, CPA, sowego facial To ficcate spletni telece de w of December 31, 1996, which is shows ESAM. Indices de space below whers in with you. If there to pre povide my Info that we willing me cice Please all your directly to Mi, A. Asif cepe is enclosed for your convenience. Sincent 2. 3.ht, Commer Superior Wholesalin. loc. To Maier, CPA: The downs COM December 31, 1996 Cap as follow 25.09. Street The Hedersdrehe Retrohen 1997 Nint Breedte Are Du SOURCE: AUDIT 1997 EXAMS 3 - QUESTION Superior Wal, Inc. 123 Celine A, USA July 25, 1997 AC Na Stre Confinn 11 A, USA Dear CLA Our ww, Miller, CPA, hy word our financial . To faciliteite balance de of Drober 31, 198, wald hown ou ew recordos SES.OO Intimin e pace below whether this is in agree with your cord. If here are excepcion, please provide lafond the wilde la recolle dhe die Pinse mall your reply diedy to Miller, CPA. And addressed care le cod for your cover Sincerely, 2. Make J. meke, Superior Wholesale, Inc. To Mler, CPA The town above is of December 31, 19%. Categrats tollow Yes watered ISO e of technical Mercedes C Sedef SIS. Nac_CLAAP cheer Nele te filter Make in that the check wall received and depend on 12/21/36, ured the wrong mer CM Superior Walling, Ine. 123 Cecamercial Dent Autow, USA Janney 18, 19 Clark Real 35 LAW Confirm 134 Jackson, LISA Dear J.P. Cum Our ador. Miller, CPA, is currendy adidas our financial a. To facile idi.please confine the balance de us as of December 31, 1996, which is shown on our seconds as $17.00. Indicate in the space below whether this is la agreement with your records. There are exception, please provide any Information that will as the sodir i cacing the difference Please tull your reply directly to Mer, CPA. A amped, sef addressed covelope is enclosed for your convenience. Sloverely. J. Fake J. 20, Congole Superior Wholding, Inc. To Me, CA: The shown above is COTEC s ef December 31, 1996, except as follows: Icrcce.Atencion Superiore DINAKHTAGRANITE Nume J. Cum et Policea Pred Date 1/1997 Superior Wholesale, loc. 123 Code E Anylowe, USA Samay 15, 1997 Dell Ouderer, Inc. Sunshine Mer Confirm 141 hvery, Dear DER Our wedoor, Mines, CPA, ki med seg facial To free confirm the balance us as of December 31, 1995, which is records SA.. Inilatespacedow where is a with your needs. If there are con le provide any Information that will sist the decidit dhe difference en mail your reply directly to MC. A stamped, adused vloe is caclosed for your de Sicerely, 3. Blake, Controller Superior Wholesaling, Inc. To Me, CPA The shown above is connect as of December 31, 1996, creep as follows Neal Seemised these in der Deo WLY Tresche centietharder De Ne De Position General Manager Dute Jos. Ir SOURCE: AUDIT 1997 EXAMS - QUESTION Pere 3 of 3 Superior W. Iac. 123 Comercial Antown, USA Jawy 15.1997 Franca. 27 Street Confira 167 Justy C, USA Dear S. ZOR: Ordi. Miller, CPA, king out facial Siements. To facilitis please cont balance du us as of December 31, 1986, which is shower code S6.000. Indicate in die space blow disagreement with your records are repase provide any Information that will assist the air is receiling the eference Picanto mail your reply direly s Miller, CTA. A mepet, dressed envelopes en Sor your convenience Secondly. J. Make J.blake, Controller Superior Wholesaling, Inc. To Mile, CPA The amount shown above seas e December 31, 1996, except follows: Seperior Wholesaling, loc. 123 Commercial Blvd. Anylon, USA Juary 15, 1997 Kaple Distrer 2700 Occo Sherehe Confirm 58 Ocean Clo, USA Dear 7. Enple Our whic, Miller, CPA, Is custody wding our financial time. To facilite luis sed, please confirm the balance de was of December 31, 1996, which show on our cordas 559.00 Indicate in the space below whether is in apoca with you records. If there me exceptions, please provide any Islom that will assistito in reconciling the difference Meuse mail your reply directly to Miller, CPA. A suamped, self- addressed covelapels caclosed for your convenience. Sincerely, J. Blake J. Dhe, Controller Superior Wholesaling, Inc. To Matr, ! The most shown above is gerect as of December 31, 1996, Except as follows: Cecht individuelle 350.000. Superior Lee Lehehehe Name Earle Position de Tale 120.92 Superler Wholesaling, Inc. 123 Commercial Elvd. Auto, DISA January 15, 1997 Grow Rang 3838 Crit Confira #71 Le Center, USA Dear I. G: Our edir, Miller, CPA is currently auditing our facial statements. To facite this audit, please confirm the balance de of December 31, 1996, which is shown her records as 525.X. Indicale in die pace below whether this is in agreement via your scords. I there are exceptions, please provide any Information that will die saditor is reconciling the difference Picie mall your reply directy to Miller, CPA, A stamped, self adrese cavcope is enclosed for your convenience. Sincerely, 2. Make 1. Make Cuer Superior Wholesale lat. To Miller, CPA: The amount shown where it CTO as of December 31, 1996, extga oli Other chefer $28.00 den 17:25 Mae L. Gas Potion Controller Date 2/22/97 Price Date Note do file: This conformation par med by the poral service are defender och andra location C Miller Superior Wholesaling, Inc. 123 Comerciale Anyt, USA Summary 15, 1997 Haller, Inc. SS Green Street Confirm 186 Granly, 284 Dear. Ne Our wadisor, Miller, CPA, scrie cor final ca. Te faciles, please coin de lance de us as of December 31, 1996, which is shown on records as 51.00. Indicates the pace below whether is a greement wide your records, there are please provide my information ont will in telling the diffonce. Please mail your reply directo Miller, CPA. Asped, addressed envelope is called for your co. Sincerely, J. Hale 3. Blake, Controlar Superior Wholesaling, lo To Miler, CPA: The shown above is on December 31, 1996, catepes follows: Maithe check for 1:47 merchandise.de 12-23-25 Muins Mines Politic Aco De 3-18-27