Pinnacle Manufacturing: Part VII Assume that your understanding of internal controls over acquisitions and cash disbursements and the related tests of controls and substantive tests of transactions support an assessment of a low control risk. The accounts payable list of 519 accounts and the $12,969,686 balance at December 31, 2016 has been made available High-Volume Items($250,000) I. American Press 2. Clean-O-Rama Co. 3. Fiberchem 4. Rufus Austin Antiques 5. Todd Machinery 6. Welburn Manufacturing $ 340,767.94 317,668.63 793,049.89 400,046.08 31,073.93 388,836.07 $2,771,442.54 Large Balance Items ($50,001-$250,000) I. A & M Sandler, Inc. $ 81348.54 75.432.73 76.408.79 73,017.24 78,682.54 71,288.95 60.255.55 60,102.78 60,769.7 130.493.5 64,125.44 84.331.05 I 7.9 16.83 88,644.92 67,985.23 147.943.95 67,936.32 85.432.51 136,071.37 93.210.48 76.921.40 88,314.64 80,09246 23.411.24 3. Beach & Hoover Refining 4. Bearing Drives Co. 5. Burton Martin 6. Cable Sys./Ind. Traf. Cons. 7. Eddie Ventura, Inc. 9. Finish Metals, Inc. 10. Freeman Furniture-Attn A/P I. GP Chambers Co. 12. Godwin Drug Co. 13. Holy Family Hospital 14. Las Flores Designs, Inc 15. Lean 16. MacDonald Svc. Corporation 17. McCoys, Inc 18. Metadyne Corp. 9. Micron Power Systems 20. Mobil Oi 21. National Elevator & Mach, Co. 22. Norris Industries 23. R & B Products 24. Remingto 25. Safety Envelope Co. 26. Scandec USA, Inc. 27. The Dutton Company 28. The Haberdashery Co. 29. University of California 30. Zzzz Bank Adjustments n Supply 223.950.34 65.942.94 63,882.02 71,869.16 80.624.95 64.471.2 $2,660,878.80 Items $50,000 and less I. Advent Sign Mfg. Co. 2. B&K Mfg. Co., Inc. 3. Bellco 4. Boston Shoecase Co. 5. Dynamic Metal Products 6. Everhart Co. 7, Fuller Travel 8. Good House Home Video, Inc. 9. Harrah's Metals, Inc. 10. J C Licht Co Glendale Hts. $ 51,750.00 42,668.50 42.710.74 52,174.50 36.546.05 47,519.14 32.470. 46.472.67 51,279.85 53,228.47 46,802.78 48.488.96 6.550.33 50.363.69 37,299.55 12. Long Beach Lawn Service 13. Premier Whirlpool Bath 15. Tower International 34 TOTAL TESTED $6,078,646.68 In order to test the Accounts Payable balance, you have decided to select a sample of 51 vendors (as listed) and request that they send a copy of their year-end statement directly to you. You plan to examine the vendors' statements and reconcile these to the accounts payable list. You plan to trace from the accounts payable list to vendors' invoices and statements for any non-responses. 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 Required Confirmation requests were sent to the sample of 51 vendors listed on page 7 Confirmation responses from 45 vendors were returned indicating no difference between the vendor's and the company's records. Six replies (attached) indicate a difference between the vendor's balance and the company's records. The auditors follow-up findings are indicated on each reply Use the audit schedule provided to determine misstatements, if any. We will analyze Fiberchem together as an illustration a) Is there a difference between the book balance and the amount confirmed by the vendor? If so, list the difference as the amount (over) under book balance Is the difference simply a timing issue (and not a misstatement)? If so, enter the amount of timing difference Is the difference a misstatement in Accounts Payable? If so, list the overstatement or (understatement) b) c) d) Is the difference a misstatement in a Balance Sheet account other than Accounts e) Is the difference a misstatement in an Income Statement account? If so, list the f) Payable? If so, list the overstatement or (understatement) overstatement or (understatement) Include a brief explanation of your analysis (of a-e) and findings. Do your overall findings appear to represent a material misstatement? Explain g) STATEMENT FROM FIBERCHEM Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. 8312 8469 8819 9002 Date 11-22-16 12-02-16 12-18-16 12-30-16 Balance Due $300,000.00 478,000.00 Amount $300,000.00 78,000.00 315,049.89 32,500.00 (2) 793,049.89 (1) 825,549.89 Auditor's notes: (I) Agrees with accounts payable listing. (2) Goods shipped FOB Fiberchem's plant on December 31, 2016; arrived at Pinnacle Manufacturing on January 4, 2017 STATEMENT FROM MOBIL OIL Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. DX14777 DX16908 Date 12-23-16 12-29-16 Amount $93,210.48 Balance Due 93,210.48 (I) 131,022.48 37,812.00 (2) Auditor's notes: (I) Agrees with accounts payable listing. (2) Goods shipped FOB Pinnacle Manufacturing on December 29, 2016; arrived at Pinnacle Manufacturing on January 3, 2017 STATEMENT FROM NORRIS INDUSTRIES Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. 14896 5111 Date 12-27-16 12-28-16 Amount $ 88,314.64 Balance Due 88,314.64 (1) 205,610.64 117,296.00 (2) Auditor's notes: (I) Agrees with accounts payable listing. (2) Goods received December 30, 2016; recorded on January 2, 2017 STATEMENT FROM REMINGTON SUPPLY Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. Date 11-11-16 11-19-16 12-04-16 12-21-16 Amount 141702 142619 142811 143600 144927 $23,067.00 2,000.00 7,100.00 27,715.24 12-29-16 (2) 53,529.00 Balance Due $23,067.00 35,067.00 42,167.00 69,882.24 23,411.24 (1) Auditor's notes: (I) Agrees wi (2) Goods shipped FOB Pinnacle Manufacturing on December 29, 2016; arrived at th accounts payable listing. Pinnacle Manufacturing on January 4, 2017 STATEMENT FROM ADVENT SIGN MFG. CO Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: $51,750.00 (I) First progress billing per contract Second progress billing per contract 7,500.00 (2) 59,250.00 Total due Auditor's notes: (I) Agrees with accounts payable listing. (2) Progress payment due as of December 31, 2016, per contract for construction of new custom electric sign; sign installation completed on January 15, 2017 STATEMENT FROM FULLER TRAVEL Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No 84360110 8436018 84360222 8436029 Date 12-04-16 12-12-16 12-21-16 12-26-16 Amount 9,411.63 (2) 9,411.63 (2) 7,100.00 (I) 13,646.85 (2) Balance Due 9,411.63 18,823.26 25.923.26 39,570.11 Auditor's notes: (I) Paid by Pinnacle Manufacturing on December 28, 2016; payment in transit at year-end (2) The total of these items of $32,470.I1 agrees with accounts payable listing. Misstatement in Related Accounts nifference Timing in (Over) Under Misstatement (d) Other e) Income Balance Stmt mis- Vendor Key Accounts Balance Per Books Amount Book No Payable Sheet by Vendor Balance Misstatement ols (uls) Misstatement ols (u/s) (f) Explanation FiberChem Mobil Norris Remington Advent Fuller TOTAL Pinnacle Manufacturing: Part VII Assume that your understanding of internal controls over acquisitions and cash disbursements and the related tests of controls and substantive tests of transactions support an assessment of a low control risk. The accounts payable list of 519 accounts and the $12,969,686 balance at December 31, 2016 has been made available High-Volume Items($250,000) I. American Press 2. Clean-O-Rama Co. 3. Fiberchem 4. Rufus Austin Antiques 5. Todd Machinery 6. Welburn Manufacturing $ 340,767.94 317,668.63 793,049.89 400,046.08 31,073.93 388,836.07 $2,771,442.54 Large Balance Items ($50,001-$250,000) I. A & M Sandler, Inc. $ 81348.54 75.432.73 76.408.79 73,017.24 78,682.54 71,288.95 60.255.55 60,102.78 60,769.7 130.493.5 64,125.44 84.331.05 I 7.9 16.83 88,644.92 67,985.23 147.943.95 67,936.32 85.432.51 136,071.37 93.210.48 76.921.40 88,314.64 80,09246 23.411.24 3. Beach & Hoover Refining 4. Bearing Drives Co. 5. Burton Martin 6. Cable Sys./Ind. Traf. Cons. 7. Eddie Ventura, Inc. 9. Finish Metals, Inc. 10. Freeman Furniture-Attn A/P I. GP Chambers Co. 12. Godwin Drug Co. 13. Holy Family Hospital 14. Las Flores Designs, Inc 15. Lean 16. MacDonald Svc. Corporation 17. McCoys, Inc 18. Metadyne Corp. 9. Micron Power Systems 20. Mobil Oi 21. National Elevator & Mach, Co. 22. Norris Industries 23. R & B Products 24. Remingto 25. Safety Envelope Co. 26. Scandec USA, Inc. 27. The Dutton Company 28. The Haberdashery Co. 29. University of California 30. Zzzz Bank Adjustments n Supply 223.950.34 65.942.94 63,882.02 71,869.16 80.624.95 64.471.2 $2,660,878.80 Items $50,000 and less I. Advent Sign Mfg. Co. 2. B&K Mfg. Co., Inc. 3. Bellco 4. Boston Shoecase Co. 5. Dynamic Metal Products 6. Everhart Co. 7, Fuller Travel 8. Good House Home Video, Inc. 9. Harrah's Metals, Inc. 10. J C Licht Co Glendale Hts. $ 51,750.00 42,668.50 42.710.74 52,174.50 36.546.05 47,519.14 32.470. 46.472.67 51,279.85 53,228.47 46,802.78 48.488.96 6.550.33 50.363.69 37,299.55 12. Long Beach Lawn Service 13. Premier Whirlpool Bath 15. Tower International 34 TOTAL TESTED $6,078,646.68 In order to test the Accounts Payable balance, you have decided to select a sample of 51 vendors (as listed) and request that they send a copy of their year-end statement directly to you. You plan to examine the vendors' statements and reconcile these to the accounts payable list. You plan to trace from the accounts payable list to vendors' invoices and statements for any non-responses. 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 Required Confirmation requests were sent to the sample of 51 vendors listed on page 7 Confirmation responses from 45 vendors were returned indicating no difference between the vendor's and the company's records. Six replies (attached) indicate a difference between the vendor's balance and the company's records. The auditors follow-up findings are indicated on each reply Use the audit schedule provided to determine misstatements, if any. We will analyze Fiberchem together as an illustration a) Is there a difference between the book balance and the amount confirmed by the vendor? If so, list the difference as the amount (over) under book balance Is the difference simply a timing issue (and not a misstatement)? If so, enter the amount of timing difference Is the difference a misstatement in Accounts Payable? If so, list the overstatement or (understatement) b) c) d) Is the difference a misstatement in a Balance Sheet account other than Accounts e) Is the difference a misstatement in an Income Statement account? If so, list the f) Payable? If so, list the overstatement or (understatement) overstatement or (understatement) Include a brief explanation of your analysis (of a-e) and findings. Do your overall findings appear to represent a material misstatement? Explain g) STATEMENT FROM FIBERCHEM Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. 8312 8469 8819 9002 Date 11-22-16 12-02-16 12-18-16 12-30-16 Balance Due $300,000.00 478,000.00 Amount $300,000.00 78,000.00 315,049.89 32,500.00 (2) 793,049.89 (1) 825,549.89 Auditor's notes: (I) Agrees with accounts payable listing. (2) Goods shipped FOB Fiberchem's plant on December 31, 2016; arrived at Pinnacle Manufacturing on January 4, 2017 STATEMENT FROM MOBIL OIL Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. DX14777 DX16908 Date 12-23-16 12-29-16 Amount $93,210.48 Balance Due 93,210.48 (I) 131,022.48 37,812.00 (2) Auditor's notes: (I) Agrees with accounts payable listing. (2) Goods shipped FOB Pinnacle Manufacturing on December 29, 2016; arrived at Pinnacle Manufacturing on January 3, 2017 STATEMENT FROM NORRIS INDUSTRIES Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. 14896 5111 Date 12-27-16 12-28-16 Amount $ 88,314.64 Balance Due 88,314.64 (1) 205,610.64 117,296.00 (2) Auditor's notes: (I) Agrees with accounts payable listing. (2) Goods received December 30, 2016; recorded on January 2, 2017 STATEMENT FROM REMINGTON SUPPLY Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No. Date 11-11-16 11-19-16 12-04-16 12-21-16 Amount 141702 142619 142811 143600 144927 $23,067.00 2,000.00 7,100.00 27,715.24 12-29-16 (2) 53,529.00 Balance Due $23,067.00 35,067.00 42,167.00 69,882.24 23,411.24 (1) Auditor's notes: (I) Agrees wi (2) Goods shipped FOB Pinnacle Manufacturing on December 29, 2016; arrived at th accounts payable listing. Pinnacle Manufacturing on January 4, 2017 STATEMENT FROM ADVENT SIGN MFG. CO Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: $51,750.00 (I) First progress billing per contract Second progress billing per contract 7,500.00 (2) 59,250.00 Total due Auditor's notes: (I) Agrees with accounts payable listing. (2) Progress payment due as of December 31, 2016, per contract for construction of new custom electric sign; sign installation completed on January 15, 2017 STATEMENT FROM FULLER TRAVEL Pinnacle Manufacturing Detroit, MI Amounts due as of December 31, 2016: Invoice No 84360110 8436018 84360222 8436029 Date 12-04-16 12-12-16 12-21-16 12-26-16 Amount 9,411.63 (2) 9,411.63 (2) 7,100.00 (I) 13,646.85 (2) Balance Due 9,411.63 18,823.26 25.923.26 39,570.11 Auditor's notes: (I) Paid by Pinnacle Manufacturing on December 28, 2016; payment in transit at year-end (2) The total of these items of $32,470.I1 agrees with accounts payable listing. Misstatement in Related Accounts nifference Timing in (Over) Under Misstatement (d) Other e) Income Balance Stmt mis- Vendor Key Accounts Balance Per Books Amount Book No Payable Sheet by Vendor Balance Misstatement ols (uls) Misstatement ols (u/s) (f) Explanation FiberChem Mobil Norris Remington Advent Fuller TOTAL