Sales Executive salaries Factory hourly payroll Factory supervisors' salaries Office salaries Sales commissions Audited Balance Preliminary Balance 10/31/2017 10/31/2018 51,315,237 $ 55,933,608 546,590 615,729 10,038,901 11,476,562 785,657 810,712 1,989,560 2,054,305 2,018,724 2,367,961 You have obtained the following information to help you perform preliminary analytical procedures for the payroll account balances. 1. There has been a significant increase in the demand for Reel In's products. The increase in sales was due to both an increase in the average selling price of 7 percent and an increase in units sold that resulted from the increased demand and an increased marketing effort. 2. Even though sales volume increased, there was no addition of executives, factory supervisors, or office personnel. 3. All employees including executives, but excluding commission salespeople, received a 3 percent salary increase starting November 1, 2017. Commission salespeople receive their increased compensation through the increase in sales. 4. The increased number of factory hourly employees was accomplished by recalling employees that had been laid off. They receive the same wage rate as existing employees. Reel In does not permit overtime. 5. Commission salespeople receive a 5 percent commission on all sales on which a commission is given. Approximately 75 percent of sales earn sales commission. The other 25 percent are "call-ins," for which no commission is given. Commissions are paid in the month following the month they are earned. a. Use the final balances for the prior year and the information in items 1 through 5 to develop an expected value for each account, except sales. b. Calculate the difference between your expectation and the client's recorded amount as a percentage using the formula (expected value - recorded amount)/expected value. c. What are your conclusions from the analytical procedures you performed (do the amounts appear reasonable)? What areas require additional audit work? You are auditing payroll for the Reel In Technologies company for the year ended October 31, 2018. The amounts from the client's trial balance, along with comparative audited information for the prior year are provided in the following information. (Click the icon to view the amounts from the trial balance.) A (Click the icon to view the additional information.) Required Requirement a. Use the final balances for the prior year and the information in items 1 through 5 to develop an expected value for each account, except sales. Requirement b. Calculate the difference between your expectation and the client's recorded amount as a percentage using the formula (expected value - recorded amount)/expected value. First find the expected value of the accounts, and then find the difference between the expected value and the client's recorded amount as a percentage. Lastly, select the appropriate assessment regarding assement difference percentage. (Round the expected value to the nearest whole dollar. Round difference as a percentage answers to two decimal places, X.XX%. Use parentheses or a minus sign for a negative percentage.) (1) Preliminary Balance 10/31/2018 (2) Expected Value [(2) - (1)]/(2) Difference as a Percentage % 10/31/2018 Executive salaries $ 615,729 11,476,562 % Factory hourly payroll Factory supervisors' salaries 810,712 % Office salaries Sales commissions 2,054,305 2,367,961
