Scenario (90 minutes) Printing Plus Inc. (PPI) is a small social enterprise that provides a variety of printing services. PPI provides hands-on job experience for at-risk youth while also providing qu...

Printing Plus Inc. (PPI) is a small social enterprise that provides a variety of printing services. PPI provides hands-on job experience for at-risk youth while also providing quality products to the small-business community that it serves. It has a small, but loyal, customer base. PPI provides credit to its customers, with a 30-day payment term.

You, CPA, have just been assigned as the audit senior on the inaugural PPI audit for the period ended December 31, 2021. Previously, PPI had reviews completed by your firm. As the senior on the audit, you will be responsible for dealing with accounts where professional judgment is required, including accounts that require management estimation. The first account you are to analyze is the allowance for doubtful accounts.

PPI has provided you with an electronic copy of its accounts receivable log for the past two years to help you determine if the allowance for doubtful accounts is appropriate. PPI's policy is to record an allowance equal to 3% of outstanding receivable balances at year end.

At December 31, 2020, PPI had outstanding receivable balances of $45,690 and recorded an allowance for doubtful accounts of $1,400.

At December 31, 2021, the balance in the allowance for doubtful accounts was $2,503.

 

Info:

I. ii. iii. iv. v. vi. vii. 

Info 2:

i. ii. iii. iv.   
v.  

Question 1:

Put together a memo to the audit partner on the appropriateness of the allowance for doubtful accounts using the information you have gathered above. The partner may wish to discuss the allowance with PPI's management, so be as specific as possible with your examples, and state any assumptions you have made in your analysis.

 

QUestion 2:

PPI's management has also asked for some guidance on best practices for data security and privacy when collecting and storing customer data. Put together a memo to the audit partner that she can share with PPI.

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