Please help asap

Required information:

In this mini-case perform some procedures required as a part of audit planning. For ease your audit manager has already organized the workpapers and completed several of the required workpapers.

Instructions:

Read the email from your manager, then read the steps in the audit program found on Work Paper A-0 and familiarize yourself with the other planning section work papers. complte all the steps on the audit program instructed by your manager.

10-k file:

https://dochub.com/blooplopeure/gYzM7mBwDjWa8z3KqJ6EoO/10-k-pdf?dt=fsy5RSj7TTkDELz4fTFb

Apollo Shoes, Inc. AUDIT PLAN-PLANNING A-0 FYE 12/312020 ou are responsible for completing all steps highlighted in green Workpaper Related Performe Reference Assertion [8) d by Comments Complete client engagement acceptance TBA DW The PY 10K is included in the Review correspondence files, prior year audit workpapers at A-3, the PY workpapers, permanent files, financial NA DW workpapers are not available per statements and auditor's reports. Apollo. See board of director 6 2 meeting minutes for more Obtain 2019 audited trial balance and 2020 A-1 and A- Trial balance obtained on unaudited trial balance 01012021 from Samual Carboy. 3 2 DW Apollo Controller 4 Obtain and review a copy of the prior year A-3 DW Obtained by DW on 12/24/2020. Foot balances and ensure mathematical the 9 a accuracy of PBC trial balances green race prior period balances to the closing balance in the prior period's financial high- 10 b statements [10-K] Determine the extent. UI wolverner, I any. lighted 11 5 of consultants, specialists, or internal NA DW Some reliance on internal audit will be necessary. ones Apollo Director of Internal Audit - are If the work of another is being used in the Karina Ramirez will be assisting on the audit, per my [DW) review |the engagement, determine that it is used in NA DW of her qualifications and the accordance with professional standards. organizational structure of Apollo Jones I have concluded that she is both you 12 a Review the minutes of the board of directors objective and competent. and committee meetings for the year and any Notes on A-3. have new agreements, leases, contracts, or other to important documents. Obtain copies of the minutes or agreements for the current or permanent workpaper files. Highlight A-3 TC matters relevant to the related audit area or for which disclosure will be 6 required in the financial statement or notes Obtain an engagement letter from the client. A-4 D'W Signed copy of engagement letter received from the client on 14 November 20, 2020. 15 8 Complete Materiality Memo. A-5 A-6 Rough draft completed, new 16 9 Complete a time budget by audit area. DW senior to track and expand time Determine staffing assignments based on ined as of 12072020 consideration of audit risks, and discuss the preliminary audit plan and key dates, i.e. A-7 DW inventory observation, mailing of 10 confirmations, etc. with the audit staff Complete independence forms for all firm Electronically signed by all firm 10 17 employees NA NA employees and filed on firm Instructions Emails A-0 Planning Audit Program intramel se of December 21 2020 A-1 PBC 2019 Trial Bala2019 Trial Balance PBC Apollo Shoes, Inc Trial Balance (Audited) 31-Dec-19 Account ID Account Description Debit Credit Single Column format 0100 Cash on Hand $1,987.28 $1,987.28 10200 Regular Checking Account $198,1 16.52 $198, 116.52 10300 Payroll Checking Account $0.00 $0.00 10400 Savings Account $3.044.958.13 $3,044,958.13 11000 Accounts Receivable $16,410,902.71 $16,410,902.71 1500 Allowance for Doubtful Accounts $1,262 819.88 ($1,262,819.88) 12000 Inventory - Spotlight $18,825,205.24 $18,825,205.24 12300 Reserve for Inventory Obsolescence $3,012.000.00 ($3,012,000.00) 14100 Prepaid Insurance $743,314.38 $743,314.38 14200 Prepaid Rent $200,000.00 $200,000.00 14300 Office Supplies $7,406.82 $7,406.82 14400 Notes Receivable-Current $0.00 14700 Other Current Assets $0.00 15000 Land $117,000.00 $117,000.00 15100 Buildings and Land Improvements $623,905.92 $623,905.92 15200 Machinery, Equipment, Office Furniture $433,217.10 $433,217.10 17000 Accum. Depreciation $163,500.00 ($163,500.00) 19000 Investments $572,691.08 $572,691.08 19900 Other Noncurrent Assets $53,840.59 $53,840.59 20000 Accounts Payable $4,633,118.09 ($4,633,118.09) 23100 Sales Tax Payable $0.00 $0.00 23200 Wages Payable $29,470.32 $1,318.69 ($29,470.32) 23300 FICA Employee Withholding $1,318.69 23350 Medicare Withholding $583.99 ($583.99) 23400 Federal Payroll Taxes Payable $6,033.01 ($6,033.01) 23500 FUTA Tax Payable $0.00 23600 State Payroll Taxes Payable $2 815.47 ($2,815.47) 23700 SUTA Tax Payable $0.00 23800 FICA Employer Withholding $1,318.69 $1,318.69) 23900 Medicare Employer Withholding $583.99 ($583.99 24100 Line of Credit ,000,000.00 ($10,000,000.00) 24200 Current Portion Long-Term Debt $0.00 24700 Other Current Liabilities $0.00 27000 Notes Payable-Noncurrent $0.00 39003 Common Stock $8,105,000.00 ($8, 105,000.00 39004 Paid-in Capital $7,423,000.00 ($7,423,000.00) 39005 Retained Earnings $2,219.620.65 ($2,219,620.65) 10000 Sales $246,172,918.44 ($246,172,918.44) 1000 Sales Returns $4,497,583.20 $4,497,583.20 12000 Warranty Expense $1,100,281.48 $1,100,281.48 45000 Income from Investments $0.00 $0.00 46000 Interest Income $204,302 81 ($204,302.81) 50010 Cost of Goods Sold $141,569,221.61 $141,569,221.61 57500 Freight $4,302 951.46 60000 Advertising Expense $897,140.01 $4,302,951.46 $897,140.01 61000 Auto Expenses $208.974.39 $208,974.39 62000 Research and Development $31.212.334.17 $31,212,334.17 34000 Depreciation Expense $133,000.00 $133,000.00 64500 Warehouse Salaries $4,633,383.82 $4,633,383.82 65000 Property Tax Expense $80,495.32 $80,495.32 66000 Legal and Professional Expense $3,605,133.96 $3,605,133.96 $7000 Bad Debt Expense $1,622,425.99 $1,622,425.99 68000 Insurance Expense $853,942.65 $853,942.65 70000 Maintenance Expense $61,136.04 70100 Utilities $135.642.99 $61,136.04 $135,642.99 70110 Phone $76,373.78 $76,373.78 70120 Postal $128,033.21 $128,033.21 71000 Miscellaneous Office Expense $17,023.27 $17,023.27 72000 Payroll Tax Exp $1,550,989.06 $1,550,989.06 (3000 Pension/Profit-Sharing Plan Ex $3,000,000.00 $3,000,000.00 74000 Rent or Lease Expense $2 603,485.87 $2,603,485.87 77500 Administrative Wages Expense $ 16.875,305.98 $16,875,305.98 78000 Interest Expense $875,000.00 $875,000.00 78500 Income Tax Expense - Federal $2 365,000.00 $2,365,000.00 78510 Income Tax Expense - State $429,000.00 $429,000.00 80000 Loss on Legal Settlement $19,172,000.00 $19,172,000.00Apollo Shoes, Inc PEC Preclosing Trial Balance A-2 31-Dec-20 Account ID Account Description Debit Amt Credit Amt Single Column format 10100 Cash on Hand $2,275.23 $2,275.23 10200 Regular Checking Account $557,125.92 $557,125.92 10300 Payroll Checking Account 90100 10400 Savings Account 53.645.599.15 53.645.599.15 1 1000 Accounts Receivable $51.515.259.98 $51.515,259.98 1 1400 Other Receivables $1.250.000.00 $1.250,00 0.00 11500 Allowance for Doubtful Accounts $1.239,009.75 ($1,239,009.75) 12000 Inventory 567.724,527.50 567.724,527.50 12300 Reserve for Inventory Obsolescence 5846,000.00 ($846,000.00) 14100 Prepaid Insurance 53.424,213.78 53.424,213.78 14200 Prepaid Rent 50.00 14300 Office Supplies 58,540100 S8,540.00 14400 Notes Receivable-Current 50.00 14700 Other Current Assets 90.00 15000 Land $117,000100 $1 17,00 0.00 15100 Buildings and Land Improvement $674,313.92 $674,313.92 15200 Machinery, Equipment, Office F $2.929,097.13 $2.929,097.13 17000 Accum. Depreciation 5610.000.00 (5610,000.00) 19000 Investments $1,998,780 39 $1.998,780.39 19900 Other Noncurrent Assets $53,840 59 $53.840.59 20000 Accounts Payable $1.922,095.91 ($1,922,095.91) 23100 Sales Tax Payable $0.00 23200 Wages Payable 90.00 23300 FICA Employee Withholding 58,439.65 (58,439.65) 23350 Medicare Withholding $11,414.99 ($11,414.99) 23400 Federal Payroll Taxes Payable $1 18,086.12 ($1 18,086.12) 23500 FUTA Tax Payable 90.00 23600 State Payroll Taxes Payable $55,106.86 ($55,106 86) 23700 SUTA Tax Payable 23800 FICA Employer Withholding 58,439.65 (58,439.65) 21900 Medicare Employer Withholding $11,414.99 ($11,414.99) 24100 Line of Credit $44.403,000.00 ($44,403,000.00) 24200 Current Portion Long-Ten Debt $0.00 24700 Other Current Liabilities 50.00 27000 Notes Payable-Noncurrent $12.0 00,00 0700 ($12,000,000.00) 39003 Common Stock 58. 105.00 0700 ($8,105,000.00) 39004 Paid-in Capital $7.423,000.00 ($7.423,000.00) 39005 Retained Earnings 56-590,483.64 (56.590,483.64) 40000 Sales $242.713,452 88 ($242,713,452 88) 41000 Sales Returns $1 1.100,220.89 $11.100.220.89 42000 Warranty Expense $1.158,128.47 $1.158,128.47 45000 Income from Investments $1.426,084 31 ($1,426,089 31) 46000 Interest Income $131,881.46 ($131,881.46) 47000 Miscellaneous Income $2,165,000.00 ($2,166,000.00) 50010 Cost of Goods Sold $130.196,645.26 $130.196,645.26 57500 Freight $4.240,263109 $4.240,263.09 60000 Advertising Expense $1.036,854.01 51.036,854.01 61000 Auto Expenses $210,502 80 $210,502.80 62000 Research and Development 5528,870.44 $528,870.44 64000 Depreciation Expense 5446.000.00 $446,60 0.00 64500 Warehouse Salaries $4.720,715.56 54.720,715.56 65000 Property Tax Expense $99.332.45 $99.332.45 66000 Legal and Professional Expense $4.913,224.45 54.913.224.45 67000 Bad Debt Experme $0.00 68000 Insurance Expense $36,106.92 $36, 106.92 70000 Maintenance Expense $35.500 87 $35,502.87 70100 Utilities 5137.33218 $137.332.18 70110 Phone $52,599 02 $52,549.02 70120 Postal $77,803 61 $77,803.61 71000 Miscellaneous Office Expense $24,891.82 $24,891.82 72000 Payroll Tax Exp 51.577,811.85 $1.577,81 1.85 73000 Pension/Profit-Sharing Plan Ex $3.630,375.80 53.630.375.80 78600 Controllers' Clearning Account 5330.375.80 (5330,375.80) 74000 Rent or Lease Expense $1.206,574.00 $1.206,574.00 77500 Administrative Wages Expense $16.197,225.43 $16.197.225.43 78000 Interest Expense $2.591,736.50 $2.591,736.50 78500 Income Tax Expense - Federal $8.900,000.00 58.400,00 0.00 78510 Income Tax Expense - State $3,100,000.00 $3.100,00 0.00 $330.119,291 01 $330.1 19,2910131-Dec-20 This WP includes several documents considered critical to the audit planning process. Apollo 2019 10-K Apolo 2019 10-K The following items could be noted by the student to be of significance to the audit: Information Relevant to 2020 Audit Audit Action Recommended January 06, 2020 Apollo CEO Letter to Larry Lancaster, Chairman, President, and CEO is a new hire. - Investigate Larry's background? Shareholders CEO Letter to Sales expected to increase 10% - Note for analytic review of expenses Shareholders COGS and exp. to remain constant - Note for analytic review of expenses Authorized purchase of $1.3 million in equipment. - Vouch to supporting documentation, trace to PP&E workpapers. ST credit refinanced, rolled into LT N/P - Note for liabilities work; ensure proper accounting and disclosure. Officers' salary increase 10% - Note for payroll analytic procedures Cost of Superbowl ad rose 10% ($1 million). - Note for review of expenses Apollo Organization Chart Apollo Org Chart June 30, 2020 Damages from "Nor'easter" cost $50,000. - Should be treated as repair, rather than capital addition Company raised prices 10% to meet expectations - Examine reasons for not meeting goals Stopped R&D on Phoneshoe. - Implications for intangible assets? Postage and telephone expense saved through e-mails - Note for analytic procedures involving expenses. Write-off A/R for $23,810.13. - Was that the only write-off? Board of Directors and Audit Advanced $1.25 million to Larry Lancaster's secretary (personal) - Related party transaction should be disclosed in footnotes. 1% interest Committee Meeting Minutes BOD Meeting Minutes Authorized $1 million for purchase of computer systems. - Verify purchase. Authorized $44,403,000 draw on LOC. - Verify the accounting for the liability. January 6, 2021 Anderson, Olds, and Watershed hired (fee $750,000)X-1 - Fee should be included in Professional Expenses Approved cash dividend ($860,000) (disbursed 03/01/21 for SH of record 12/31/20) - Dividend should be accrued. Email from CAE and info Reported a $12 million negligence suit - Contact client attorneys, possible contingent liability. about new computer system Info about new IT Machinery purchased in early 2017 not operational - Check on status. system Approved bonuses for 12/31/20 - $450,000 bonuses should be accrued at 12/31/20 Company approved $3,300,000 contribution to EBP - Note for footnotes. No Superbowl ad this year - Note for analytic proceduresSigned Engagement Letter A-4 Apollo Shoes, Inc. 12/31/2020 October 26, 2020 Mr. Larry Lancaster, Chairman Apollo Shoes, Inc. Shoetown, ME Dear Mr. Lancaster: This will confirm our understanding of the arrangements for auditing Apollo Shoes, Inc. financial statements for 2020. We will audit the balance sheet at December 31, 2020, and the related statements of income, retained earnings, and cash flows for the year ending that date. Our audit will be made in accordance with the Standards of the Public Company Accounting Oversight Board and will include such tests of the accounting records and such other auditing procedures as we consider necessary. Our audit will be based on samples of recorded transactions. We will plan the audit to detect material errors and frauds that may affect your financial statements. Our work, however, is subject to the unavoidable risk that errors, frauds, and illegal acts, will not be detected. We expect to obtain reasonable, but not absolute, assurance that major misstatements do not exist in the financial statements. Our findings regarding your system of internal control, including information about significant deficiencies and material weaknesses, will be reported to the audit committee of your board of directors in a separate letter at the close of the audit. At your request, but pending approval by your Board of Directors, we will prepare all required federal tax returns and the state franchise tax returns. We will provide your staff with a list of schedules needed by our staff during the audit. The delivery dates have been discussed and mutually agreed upon. We understand that your staff will prepare all the schedules in the package, all the financial statements and notes thereto, and the Form 10-K for our review. The scope of our services does not include preparation of any of these financial statements. Ms. Darlene Wardlaw will be the manager in charge of all work performed for you. She will inform you immediately if we encounter any circumstances that could significantly affect our fee estimate of $750,000 discussed with you on October 17, 2020. She is aware of the due date for the audit report, March 15, 2021. You should feel free to call on her at any time. If the specifications above are in accordance with your understand of the terms of our engagement, kindly sign below and return the duplicate copy to us. We look forward to serving you as independent public accountants. Accepted by_ /s/ Larry Lancaster Date _11/02/2020Apollo Shoes ENGAGEMENT MATERIALITY Prepared by (Required for all engagements) CLIENT: Apollo Shoes PERIOD ENDED: December 31. 2020 This completed form must be provided to the engagement quality control reviewer in the planning stage of every audit. Please complete all the cells highlighted in yellow. PLANNING MATERIALITY CALCULATION Only if the current year net income (less) (or other measure) is significantly different from the entity's historical results would 2-year averaging to obtain normalized net income (loss) (or other measure) be appropriate. PROFIT ORIENTED ENTITIES Current Year Prior Year Net income (los) Plus (minus) unusual, non-recurring revenues and cinemacs. and calmordinary items. ADJUSTED NET INCOME (LOSS) Adjusted net income ( love) multiplied by: 0 Current Year TOTAL ASSETS Tolal amicts multiplied by: 0 Current Year TOTAL REVENUES Plus (minus] unusual, non-recurring revenues ADJUSTED REVENUES Total adjusted revenues multiplied by: JUSTIFICATION OF PLANNING MATERIALITY I. Financial data source fir. actual, budget, Year end trial balance, actual data obtained from client praisectionl: total sisacts, etherj: Adjusted net income Justification: USE THIS BOX TO DOCUMENT AND JUSTIFY WHICH BASIS YOU'VE SELECTED Standard 514 med 3. Percentage of financial data source used: 4. Amount selected (planning materiality) Being that Apollo is a new client and we were not provided with materiality amounts from the predecessor auditor, we assume that planning 5. Prior year's final materiality materiality in 5% of net income Com 2019 6. Performance materiality/Tolerable misstatement (HI of planning materiality) 7. Listing scope (amount threshold far suggested adjustments) (ming 5%% to 10%% of planning materiality based on expected level of adjustments is mually appropriate Engagement Partner A. Andersin Engagement Quality Control Reviewer Emeal OldsApollo Shoes, Inc A-6 Audit Budget Prepared by: DW 31-Dec-20 Reviewed by: AA Auditor Billing Rate Audit Area Projected Hours Actual Hours Extended Cost Darlene Wardlay 357 Planning 300 107,100 Taylor Crump 225 Internal Control Testing 275 61,875 Senior 298 Cash 150 44,700 Senior 298 Accounts Receivable 180 53,640 Taylor Crump 225 Inventory 150 33,750 Taylor Crump 225 Prepaids 90 20,250 Taylor Crump 225 Property, Plant and Equipment 200 45,000 Taylor Crump 225 Other Assets 90 20,250 Senior 298 Current Liabilities 200 59,600 Senior 298 Notes Payable 150 44,700 Darlene Wardlay 357 Stockholders' Equity 250 89,250 Senior 298 Revenue 200 59,600 Taylor Crump 225 Expenses 200 45,000 Total $ 684,715.00 Contracted Price $ 750,000.00 Profit $ 65,285.00A-7 Prepared by: DW Reviewed by AA Apollo Shoes, Inc. Audit Staffing Memo - A-7 December 31, 2020 Based on the information reviewed in the Apollo Shoes 10-K, minutes of the board of directors, and other documents, I believe that the audit team will require the following specialized expertise: a. Special expertise in Apollo's business and products is probably not necessary. The products are ordinary shoes. The company gave no indication of dealing in complicated transactions such as rubber futures hedging. Auditors with general retail and wholesale experience ought to be able to cope with the expertise demands. b. The audit team will need some special expertise in several areas: (1) the tax personnel probably know how to prepare the state franchise tax return, and that expertise might not be very special, (2) auditors with SEC knowledge and experience will need to participate, and (3) the team will need people with computer expertise on the engagement.These emails are NOT workpapers. Rather they are useful communications for Date: 02 NOV 2020 14:37: 42 +0000 completing your case. They do From: "Darlene Wardlaw" not get a workpaper Subject: More planning stuff for Apollo reference. We received the engagement letter from Apollo. So, we need to go ahead and wrap up the planning stuff. You already got started, so this should seem familiar. I have completed most of the audit resource documents (budget, etc.). But we need to check the trial balances from the client (you'd be surprised how often they don't balance), and work up the materiality memo. If you could take care of that and take a look at any of the other items from the program that need attention, that would be so great. DW budget complete check trial balance work on memo ignore these i wrote these as notes. Instructions Emails A-0 Planning Audit Program A-1 PBC 2019 Trial Balance A-2 PBC 2020 Trial Balance A-3 ... (+