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You are an audit assistant with a public accounting firm in Mayfield, Ontario. You have been assigned to audit the Accounts Receivable (AR) for Mayfield Residential Hotel (MRH), a hotel located in your town. MRH offers accommodation on a nightly basis or for long-term stays. Recently, due to the COVID-19 crisis, many health care workers have been transferred temporarily from other cities and have been accommodated by their employer companies in the MRH. MRH has credit arrangement with a number of different companies for accommodating employees on temporary transfers to Mayfield. The aged AR listing for MRH as of December 31, 2020 is attached (see below). During the planning meeting, the audit manager for this audit informed the team that performance materiality is $10,000 and overall materiality is $15,000. The controls over AR were assessed to be high control risk in the previous year's audit and since there were no changes this year the audit manager plans to use that assessment again this year. No misstatements were found in the audit of AR last year. The audit manager has asked you to review the aged AR listing and select a sample of customer balances to confirm that will cover approximately 25% of the total balance. 120+DAYS CURRENT 0-30DAYS 1695.02 2074.05 554.07 61-90DAYS 122.17 91-120DAYS 166.53 31-60DAYS 211.27 562.59 102.98 1148.47 149.85 203.49 94.24 129.85 204.09 897.56 310.00 783.56 1387.42| 243 21 1391.86 323.81 423.42 579.60 668.95 166.08 872 29 1834.07 402727 511.29 445.55 Mayfield Residential Hotel Inc Accounts Receivable Aging List As at December 31, 2020 CUSTOMER CUSTOMER TOTAL NAME NUMBER RECEIVABLE Alberta Inc. 38322 2194.99 Bo Co. Limited 38326 2636.64 Di & Co. Ltd. 38329 657.05 Dimas Inc. 38330 1148.471 Fang Limited 38331 1537.27 Gauva Inc 38332 576.55 Gavinelle Ltd 38333 1690.19 Imajimo Inc. 38334 1221.37 loulian Ltd 38335 1516.98 Jae Kyo Corp 38338 1090.89 Jonat Inc 38348 2105.28 Kareng Inc. 38350 316.751 Kavitav Limited 38359 1866.90 Kelvia LLP 38360 2804.27 Lilune Inc. 38361 402727 Lindsay's Limited 38364 1384.00 Marwa Inc. 38366 978.94 Stephenson & Co. 38367 2123.90 Sucherro Corp 38369 1601.95 Michaels & Michaels 38374 1333.62 Ming Inc. 38376 0.00 Nathar Ltd. 38381 0.00 Orlando Corp 38385 4698.62 Prana LLP 38391 2938.42 Rajiv Inc. 38392 6243.36 Renee Limited 38393 2143.30 Uyen Inc. 38396 445.36 Sydney Corp. 38397 1104.37 Zoumatra Inc. 38398 0.00 50386.71 990.78 150.67 854.39 140.22 304.76 665.44 1384.00 94.24 94.24 94.24 364.99 788.95 331.23 1334.95 1601.95 192.24 353.59 786.67 1.12 169.80 344.59 788.95 1414.95 2613.87 314.88 5977.93 720.06 1914.95 75.05 265.43 634.46 445.36 178.60 788.78 288.77 637.00 29617.00 8019.89 3602 24 2348.68 6676.73 Required: a) Select a sample (using judgmental sampling) of customer balances for confirmation from the aged December 31 2020 AR listing. Explain the reasons you have for selecting these items. b) Assume the total sample you selected was $13,500 and the confirmations result in a total misstatement of $4,400 (an overstatement). i) What is the best estimate of the total misstatement in accounts receivable? (show your calculation) ii) What action would you take based on your results in i) and why? You are an audit assistant with a public accounting firm in Mayfield, Ontario. You have been assigned to audit the Accounts Receivable (AR) for Mayfield Residential Hotel (MRH), a hotel located in your town. MRH offers accommodation on a nightly basis or for long-term stays. Recently, due to the COVID-19 crisis, many health care workers have been transferred temporarily from other cities and have been accommodated by their employer companies in the MRH. MRH has credit arrangement with a number of different companies for accommodating employees on temporary transfers to Mayfield. The aged AR listing for MRH as of December 31, 2020 is attached (see below). During the planning meeting, the audit manager for this audit informed the team that performance materiality is $10,000 and overall materiality is $15,000. The controls over AR were assessed to be high control risk in the previous year's audit and since there were no changes this year the audit manager plans to use that assessment again this year. No misstatements were found in the audit of AR last year. The audit manager has asked you to review the aged AR listing and select a sample of customer balances to confirm that will cover approximately 25% of the total balance. 120+DAYS CURRENT 0-30DAYS 1695.02 2074.05 554.07 61-90DAYS 122.17 91-120DAYS 166.53 31-60DAYS 211.27 562.59 102.98 1148.47 149.85 203.49 94.24 129.85 204.09 897.56 310.00 783.56 1387.42| 243 21 1391.86 323.81 423.42 579.60 668.95 166.08 872 29 1834.07 402727 511.29 445.55 Mayfield Residential Hotel Inc Accounts Receivable Aging List As at December 31, 2020 CUSTOMER CUSTOMER TOTAL NAME NUMBER RECEIVABLE Alberta Inc. 38322 2194.99 Bo Co. Limited 38326 2636.64 Di & Co. Ltd. 38329 657.05 Dimas Inc. 38330 1148.471 Fang Limited 38331 1537.27 Gauva Inc 38332 576.55 Gavinelle Ltd 38333 1690.19 Imajimo Inc. 38334 1221.37 loulian Ltd 38335 1516.98 Jae Kyo Corp 38338 1090.89 Jonat Inc 38348 2105.28 Kareng Inc. 38350 316.751 Kavitav Limited 38359 1866.90 Kelvia LLP 38360 2804.27 Lilune Inc. 38361 402727 Lindsay's Limited 38364 1384.00 Marwa Inc. 38366 978.94 Stephenson & Co. 38367 2123.90 Sucherro Corp 38369 1601.95 Michaels & Michaels 38374 1333.62 Ming Inc. 38376 0.00 Nathar Ltd. 38381 0.00 Orlando Corp 38385 4698.62 Prana LLP 38391 2938.42 Rajiv Inc. 38392 6243.36 Renee Limited 38393 2143.30 Uyen Inc. 38396 445.36 Sydney Corp. 38397 1104.37 Zoumatra Inc. 38398 0.00 50386.71 990.78 150.67 854.39 140.22 304.76 665.44 1384.00 94.24 94.24 94.24 364.99 788.95 331.23 1334.95 1601.95 192.24 353.59 786.67 1.12 169.80 344.59 788.95 1414.95 2613.87 314.88 5977.93 720.06 1914.95 75.05 265.43 634.46 445.36 178.60 788.78 288.77 637.00 29617.00 8019.89 3602 24 2348.68 6676.73 Required: a) Select a sample (using judgmental sampling) of customer balances for confirmation from the aged December 31 2020 AR listing. Explain the reasons you have for selecting these items. b) Assume the total sample you selected was $13,500 and the confirmations result in a total misstatement of $4,400 (an overstatement). i) What is the best estimate of the total misstatement in accounts receivable? (show your calculation) ii) What action would you take based on your results in i) and why