Prepaids and Other Assets

Date: 26 JAN 201810:24:53+0000 From: "Darlene Wardlaw" Subject: Prepaids and other Assets Prepaids You now need to audit prepaids, but don't spend too much time on them. There just isn't a lot of risk in this area. Because the amounts are not significant, let "the Crumpler" do most of the legwork (vouching invoices, examining cancelled checks, examining titles, etc.) for you on prepaids and fixed assets. On second thought, insurance expense looks really low compared to last year's - better check it out. Other Assets Since I know that your hands have been full, I tried to help out with other assets. With the information below, I think you can complete the Investments and other assets sections (II) : 1. By luck, Shock-Proof Socks is one of our firm's clients. I checked with Dave Masterson, the audit manager, about how the company is doing. He said that after reporting no income for several years, they struck gold in 2017, reporting total income of $3,130,610.03. The company has yet to pay out any dividends though. 2. When I had lunch with Eric Unum, we discussed Apollo's recent purchase of Synergizer Battery stock. He indicated that Larry eventually wanted to purchase controlling stock in the company when Apollo started moving production inhouse. While in his office, I examined the broker's confirmation, the cancelled check ( $3582 ), and examined the stock certificate for 20,000 shares in Apollo's name. The price of the stock was unchanged as of December 31 from its purchase price of $16.13. Personally, I would be surprised if Apollo will ever be able to purchase even 5% of Synergizer's stock. 3. You may want to think about the Phoneshoe patent, since the company has decided to discontinue research and development efforts on it. 4. Investment income is composed of the equity earnings in Shock-Proof Socks and a transfer from the Controller's Clearing Account for $330,375.80. The clearing account is a temporary account Apollo uses for out of balance items and transactions they can't identify. If there is a balance at the end of the year, they either recognize miscellaneous income or expense to clear it out. The amount is the same amount as the December 26 purchase of the investment in Synergizer. You should investigate this further. 5. Do some analytic procedures on interest income to make sure that it is reasonable with respect to the interest rate on the bank confirmation and compared to last year. Acadiana Insurance Agency 2132 Highland Road, Suite 225 Baton Rouge, LA 70803 Phone: 225-555-1212 January 23, 2018 Anderson, Olds and Watershed Certified Public Accountants Shoetown, ME This is to confirm that during 2017, Apollo Shoes, Inc. had the following insurance policies listed with this agency: State Fire Insurance: Policy \# 624-3200, fire and extended coverage on plant building and contents, $50,000,000,$100,000 deductible, dated January 1, 2015, 4-year term, premium $1,414,414.92. Ironworks Insurance Group: Policy \# 1645-032-692, corporate vehicle liability, $500,000, dated January 1, 2015, 3-year term, premium $108,320.76. Rock Solid Fidelity: Policy \# UTK-394, fidelity bond on employees and directors, $250,000, dated January 1,2017,5-year term, premium $2,717,006.32. The previous fidelity bond policy (UTK-393) expired as of December 31, 2016. Sincerely Yours, Apollo Shoes, Inc. Prepaid Expenses Lead Schedule For Year Ended 12/31/2017 Apollo Shoes, Inc. Other Assets Lead Schedule For Year Ended 12/31/2017 Date: 3 FEB 2018 12:35:15 +0000 From: "Timothy Crumpler" Subject: Prepaids Well I did all your work for you (again!): - I examined five cancelled checks written during the year for $200,000 each for building rental through June 30, 2017. Even though they moved into a new building in February 2016 , they couldn't get out of their lease until this year. - As I noted in my e-mail about the inventory observation, I observed the counting of office supplies on December 31. They all appeared to be there. - I don't know or understand what you want me to do with the insurance confirmation. I'll let you do that