SOURCE: AUDIT 1997 EXAMS 3 OUESTION Poze 103 Number 3 (20 points - approximately 54 minutes) Miller, CPA, is engaged to madir the financial statements of Superior Wholesaling for the year ended December 31, 1996. Miller obtained and documented an understanding of Superioa's internal control relating to accounts receivable and assessed control risk relating to accounts receivable at the maximum level. Miller requested and obtained from Superior an ared accounts receivable schedule listing the total amount owed by cach customers of December 31, 1996, and sent positive confirmation requests to a sample of the customers. Subsequently, Miller lested the accuracy of the aged accounts receivable schedule. Miller has asked Adler, de staff assistant assigned to the engagement, to follow up on the eight returned confirmations that appear on the following two pages. Assume that each confirmation is material if the potensial unisstatement is projected to the population Required: a. Describe the procedure(s), if any, that Adler should perform to resolve each of the eight confirmations that were returned. Assume that Superior will record any necessary adjusting entries and that Adler will verify that they are appropriate. b. Assume that Miller sent second requests for accounts receivable balances initially selected for confirmation for which no responses were received. Describe the alternative substantive procedures that Miller should consider applying to the accounts receivable selected for confirmation for which no responses were received to Miller's second requests. Assume that these accounts receivable in the aggregate, when projected as misstatements to the population, would affect Miller's decision about whether the financial statements are materially misstated. c. In addition to performing the confirmation procedures and alternative procedures described in requirements a and b and the procedures described in the first paragraph above, what additional substantive procedures should Miller consider performing to complete the audit of Superior's accounts receivable and related allowances? Assume that all accounts receivable are trade receivables. SOURCE AUDIT 1997 EXAMS. OUTSTION Superior Wheeling. Ieca 323 Cimin Ay, USA Jawy 15, 1997 AC NAS Confirm 1 Dear Cl. A Our audi, Mir, CM, carry on our financial To facilitate tisadi, please conditie balice us as of December 31, 1996, which is shown ou cur recorda se S. Indice in the space below whether this is in prome your records, there are excepcions, please provide any Indormation that will assist the auditor in reconciling dit difference Prase mail your reply diedy to Miller, CPA Aseed, self. essed cavelope is enclosed for your convenie, Sincerely, J. War J. Blake, Controller Superior Wholesaling, Inc. To Miller, CPA: The shown above is correct as of December 31, 1996, Croep as follows: Yes, we endered S25.000 wewechse from Superinin November. Meer we Mnilld Superior a check for $25.000 2/18 Name.OL.Adams Position Accounting. Mer. Dax 102/97 Nole so files: Plate indicates that the check was received and deposited on 12/28/98, bnr posted to the wrong customers prior Will, Inc. 323 Cristo, Antown, USA Say 15, 19 Halere Liew Drive Confirm 128 Centrally, USA Dear S. Oor wudlow, Miller, CA, et ining our alements. To facilitate dus audit. please contin balace due us as of Deccorher 31, 1996, which is how on our seconds 5 $25.00 Indice in the space below whether is in a with your records. If there are exception, please provides information that will assist the auditor la reching the difference Please mall you reply directly to Miller, CPA, Amped, self- addrested velope is enclosed for your convenient Sincerely, J. Make 3. Bake, Contact Superior Wholesaling, Inc. To Miler, CPA: The amount shown above is corres of December 31, 1996, Except as follows: Sure wered $25.000 of merchandise on Oct. 10. 1996, but Superior ef-stock until recently. They had ordered the Rosend we finally received them on er 6.997 Name S. Brow Position A/P Supervisor Date 1/1/92 Superior Wholesalias, loc, Neraber Newer. Sucheck the Nicole McDat 127 Now flakeha the checkered and daud ou 120/9, la pwed to the went t AD Rondingly received theme.61997 Name Post A/P Super DIAZ C Mer Superler Wholesale, Inc. 123 Commercial Twe. Axytown, USA January 15, 1997 Clasketa 35 meter Confirm 134 Jackson, USA Dr. P. Cummins Our auditor, Miller, CPA, is currently andling our financial statements. To facilitate this audit, please confirma die balance due as as of December 3), 1996, which is shown on our secords as 532.02. Indicate in the space below whether this is to agreement with your records. If there are exceptions, please provide my information that will assist the auditor in reconciling the difference. Please all your reply directly to Miller, CPA. A stamped, sels. addressed envelope is enclosed for your convenience. Sincerely, J. Blake J. Hake, Controller Superior Wholesaling, Inc. To Miller, CPA: The amount shown above is correct as of December 31, 1996, Creept as follows: We received 574.000 creads on consignment from Superiore 12/102K at thate mer old wol Nane J. Clinings Position President Date 2/19/97 Superior Wbolestie luc. 123 Com Divd. Amylowe, USA Jy 15,197 Delle Outlet Storer, Ine. Sunshine Mal Confira 141 River City, USA Year Khan Our editor. Miller, CPA, is currendy sudding our facial statements. To facilitate this wait, please confirm the balance de us as of December 31, 1996, which is shown on our records $45.000. Indicate to the space below whether this is in agree with your records. If there are exceptions, please provide any information that will assist the woditor in reconciling the difference. Please tell your reply directly to Miller. CPA. A stamped, self- addressed envelope is enclosed for your counce. Sincerely, J. Blake 3. Blake, Controller Superior Wholesaling, Inc. To Miller, CPA: The amount shown above is correct as of December 31, 1996, except as follows: No way! Superior promised these coods in 10 days or Des 2 When we didn tresciwe there. I conceled the order on Dec 17 General Wholesaling shipped as similar ponds_overnight! Name R. Dunn Position General Manager Date Jan. 189 SOURCE: AUDIT 1997 EXAMS.L. QUESTION 3 of 3 Seperier Welastine. 123 Commercial Anyton, USA Sony 15, 1997 ple 2100 Shered Confirm 858 O CU, 2484 Tar. Our dor, Mar, CPA. It contently woditing co fiancial aiements. Yo facilitate des af, please confirmar Lalonde us of December 31, 1996, wlicts shown on our records as $59.0 Indiese in the space below whether this in promoc with you records. Ir there we exceptions, please provide any Informal dit will assist the auctior in reconciling the difference He mall your reply directly to Miller, CPA, A sted, self. addressed envelope is enclosed for your convenience. Sincerely, 1. Blake 3. Dinke, Controller Superior Wholesaling, Inc. To Miller, CPA: Tie annount shown above is correct as of December 31, 1996, except as follows: can amente pavelle vouchement individualno. 2 con lwa 550.000 at Sunrier is neem een laculiers Lone contrabble on the socie Namn: 7. Erle Position Accounting Mer Date 120/92 superior Wiolesine, loc. 193 Commiva. Ano, USA JUNY 15,197 www. Jy het Confirm #67 Jay C, USA Dear & Iron Our odio. Mir, CA, en wing our Time alements. To fine this audit, plus confirm the balance des us as of December 31, 1996, which is shown on GIS as 365.CO.Iodica in die space below which is isme will your records. If the exceptions, please provide any information that will assist the models Toconciling it difference Please mail your reply directly to Miler, CTA. A med, self- addressed cnvelope is enclosed for your convenience Stec J. Nlake 3. Blake, Controller Superior Wholesaling, Inc. To Miller, CPA The amount shown above is correct as of December 31, 1996, except as follows: Name Position Dale Nofe to files: This confirmation was returned by the postal service as Teturn to sender - no such addressee at this location." C. Muller Superior Wholesaling, Inc. 123 Commercial Blvd. Antytown, USA January 15, 1997 Growe Retaling .3838 Curs Blvd. Confirm #77 Unior Center, USA Superior Wholesaling, Inc. 123 Commercial Blvd. Anytowa, USA January 15, 1997 Hall Enterprises, Inc. 55 Green Street Confirm #86 milly dry MCP. Apeli de for your oly. 1. C. 3. Oke, Cow Bayanarulay. . To Me. Mi The most above is to Do 31. 1995, to follow To Me, CPA: The show above metas e Dember 1, 1996, Cafe Mercher COURSE Jente elecen Superler Wholesale, Inc. 123 Commercial Bhd Anytown, USA January 15, 1997 Gw Renee Oral wat Confirm 171 El Center, USA Dear M. Ga Our ander, Maler, CPA is currently editing our facial s. To facute this audit, please confirm the balance de as of December 31, 1996, Mich is shown on our records as 28.08. Indicate in the space below whether this is in agreement with your records. If there are exceptions, please provide may information that will assist the editor in reconciling the difference. Please mall your reply directly to Miller, CPA. A camped, self- addressed cavclope enclosed for your convenience. Sincerely, 2. Make J. Hake, Controller Superior Wholesalia, Inc. To Miller, CPA: The amount shown above is correct as of December 31, 1996, except as follows: Ormond show there there for $25.000 vos malled on 17/17/05 Nanie H. Gales Position Controller Date 7/22/97 Nam Twice Nere a fun the confirmation was returned by the posts amrice of the der uchaster the location. C. Mar Superior Wholesaling, loss. izs Cereret d. Anyton, USA January 15, 1997 Hall Enterprises, Inc. SS Green Street Confirm #86 Gran Cley, USA Dear X. Nese Our auditor, Milker, CPA. Is curseully auditing our financial statement. To face dus audit, please confirm the balance de ws as of December 31, 1996, which is shown on our records as $2.000. Indicate in the space below whether this is in agreement with your records. If there are exceptions, please provide say Informacion that will assist the auditor in reconciling the difference Please mail your reply directly to Miler, CPA. A stamped, self- addressed covelope is enclosed for your convenience. Sincerely, J. Blake J. Blake, Controller Superior Wholesaling. lo.. To Miller, CPA: The amount shown above is correct as of December 31, 1996, cxcept as follows: Mailed the check Yer full amount on 1-3-97 merchandise was only received on 12-23-96 Name X. Hines Position Accountant Date 1-18-97 SOURCE: AUDIT 1997 EXAMS 3 OUESTION Poze 103 Number 3 (20 points - approximately 54 minutes) Miller, CPA, is engaged to madir the financial statements of Superior Wholesaling for the year ended December 31, 1996. Miller obtained and documented an understanding of Superioa's internal control relating to accounts receivable and assessed control risk relating to accounts receivable at the maximum level. Miller requested and obtained from Superior an ared accounts receivable schedule listing the total amount owed by cach customers of December 31, 1996, and sent positive confirmation requests to a sample of the customers. Subsequently, Miller lested the accuracy of the aged accounts receivable schedule. Miller has asked Adler, de staff assistant assigned to the engagement, to follow up on the eight returned confirmations that appear on the following two pages. Assume that each confirmation is material if the potensial unisstatement is projected to the population Required: a. Describe the procedure(s), if any, that Adler should perform to resolve each of the eight confirmations that were returned. Assume that Superior will record any necessary adjusting entries and that Adler will verify that they are appropriate. b. Assume that Miller sent second requests for accounts receivable balances initially selected for confirmation for which no responses were received. Describe the alternative substantive procedures that Miller should consider applying to the accounts receivable selected for confirmation for which no responses were received to Miller's second requests. Assume that these accounts receivable in the aggregate, when projected as misstatements to the population, would affect Miller's decision about whether the financial statements are materially misstated. c. In addition to performing the confirmation procedures and alternative procedures described in requirements a and b and the procedures described in the first paragraph above, what additional substantive procedures should Miller consider performing to complete the audit of Superior's accounts receivable and related allowances? Assume that all accounts receivable are trade receivables. SOURCE AUDIT 1997 EXAMS. OUTSTION Superior Wheeling. Ieca 323 Cimin Ay, USA Jawy 15, 1997 AC NAS Confirm 1 Dear Cl. A Our audi, Mir, CM, carry on our financial To facilitate tisadi, please conditie balice us as of December 31, 1996, which is shown ou cur recorda se S. Indice in the space below whether this is in prome your records, there are excepcions, please provide any Indormation that will assist the auditor in reconciling dit difference Prase mail your reply diedy to Miller, CPA Aseed, self. essed cavelope is enclosed for your convenie, Sincerely, J. War J. Blake, Controller Superior Wholesaling, Inc. To Miller, CPA: The shown above is correct as of December 31, 1996, Croep as follows: Yes, we endered S25.000 wewechse from Superinin November. Meer we Mnilld Superior a check for $25.000 2/18 Name.OL.Adams Position Accounting. Mer. Dax 102/97 Nole so files: Plate indicates that the check was received and deposited on 12/28/98, bnr posted to the wrong customers prior Will, Inc. 323 Cristo, Antown, USA Say 15, 19 Halere Liew Drive Confirm 128 Centrally, USA Dear S. Oor wudlow, Miller, CA, et ining our alements. To facilitate dus audit. please contin balace due us as of Deccorher 31, 1996, which is how on our seconds 5 $25.00 Indice in the space below whether is in a with your records. If there are exception, please provides information that will assist the auditor la reching the difference Please mall you reply directly to Miller, CPA, Amped, self- addrested velope is enclosed for your convenient Sincerely, J. Make 3. Bake, Contact Superior Wholesaling, Inc. To Miler, CPA: The amount shown above is corres of December 31, 1996, Except as follows: Sure wered $25.000 of merchandise on Oct. 10. 1996, but Superior ef-stock until recently. They had ordered the Rosend we finally received them on er 6.997 Name S. Brow Position A/P Supervisor Date 1/1/92 Superior Wholesalias, loc, Neraber Newer. Sucheck the Nicole McDat 127 Now flakeha the checkered and daud ou 120/9, la pwed to the went t AD Rondingly received theme.61997 Name Post A/P Super DIAZ C Mer Superler Wholesale, Inc. 123 Commercial Twe. Axytown, USA January 15, 1997 Clasketa 35 meter Confirm 134 Jackson, USA Dr. P. Cummins Our auditor, Miller, CPA, is currently andling our financial statements. To facilitate this audit, please confirma die balance due as as of December 3), 1996, which is shown on our secords as 532.02. Indicate in the space below whether this is to agreement with your records. If there are exceptions, please provide my information that will assist the auditor in reconciling the difference. Please all your reply directly to Miller, CPA. A stamped, sels. addressed envelope is enclosed for your convenience. Sincerely, J. Blake J. Hake, Controller Superior Wholesaling, Inc. To Miller, CPA: The amount shown above is correct as of December 31, 1996, Creept as follows: We received 574.000 creads on consignment from Superiore 12/102K at thate mer old wol Nane J. Clinings Position President Date 2/19/97 Superior Wbolestie luc. 123 Com Divd. Amylowe, USA Jy 15,197 Delle Outlet Storer, Ine. Sunshine Mal Confira 141 River City, USA Year Khan Our editor. Miller, CPA, is currendy sudding our facial statements. To facilitate this wait, please confirm the balance de us as of December 31, 1996, which is shown on our records $45.000. Indicate to the space below whether this is in agree with your records. If there are exceptions, please provide any information that will assist the woditor in reconciling the difference. Please tell your reply directly to Miller. CPA. A stamped, self- addressed envelope is enclosed for your counce. Sincerely, J. Blake 3. Blake, Controller Superior Wholesaling, Inc. To Miller, CPA: The amount shown above is correct as of December 31, 1996, except as follows: No way! Superior promised these coods in 10 days or Des 2 When we didn tresciwe there. I conceled the order on Dec 17 General Wholesaling shipped as similar ponds_overnight! Name R. Dunn Position General Manager Date Jan. 189 SOURCE: AUDIT 1997 EXAMS.L. QUESTION 3 of 3 Seperier Welastine. 123 Commercial Anyton, USA Sony 15, 1997 ple 2100 Shered Confirm 858 O CU, 2484 Tar. Our dor, Mar, CPA. It contently woditing co fiancial aiements. Yo facilitate des af, please confirmar Lalonde us of December 31, 1996, wlicts shown on our records as $59.0 Indiese in the space below whether this in promoc with you records. Ir there we exceptions, please provide any Informal dit will assist the auctior in reconciling the difference He mall your reply directly to Miller, CPA, A sted, self. addressed envelope is enclosed for your convenience. Sincerely, 1. Blake 3. Dinke, Controller Superior Wholesaling, Inc. To Miller, CPA: Tie annount shown above is correct as of December 31, 1996, except as follows: can amente pavelle vouchement individualno. 2 con lwa 550.000 at Sunrier is neem een laculiers Lone contrabble on the socie Namn: 7. Erle Position Accounting Mer Date 120/92 superior Wiolesine, loc. 193 Commiva. Ano, USA JUNY 15,197 www. Jy het Confirm #67 Jay C, USA Dear & Iron Our odio. Mir, CA, en wing our Time alements. To fine this audit, plus confirm the balance des us as of December 31, 1996, which is shown on GIS as 365.CO.Iodica in die space below which is isme will your records. If the exceptions, please provide any information that will assist the models Toconciling it difference Please mail your reply directly to Miler, CTA. A med, self- addressed cnvelope is enclosed for your convenience Stec J. Nlake 3. Blake, Controller Superior Wholesaling, Inc. To Miller, CPA The amount shown above is correct as of December 31, 1996, except as follows: Name Position Dale Nofe to files: This confirmation was returned by the postal service as Teturn to sender - no such addressee at this location." C. Muller Superior Wholesaling, Inc. 123 Commercial Blvd. Antytown, USA January 15, 1997 Growe Retaling .3838 Curs Blvd. Confirm #77 Unior Center, USA Superior Wholesaling, Inc. 123 Commercial Blvd. Anytowa, USA January 15, 1997 Hall Enterprises, Inc. 55 Green Street Confirm #86 milly dry MCP. Apeli de for your oly. 1. C. 3. Oke, Cow Bayanarulay. . To Me. Mi The most above is to Do 31. 1995, to follow To Me, CPA: The show above metas e Dember 1, 1996, Cafe Mercher COURSE Jente elecen Superler Wholesale, Inc. 123 Commercial Bhd Anytown, USA January 15, 1997 Gw Renee Oral wat Confirm 171 El Center, USA Dear M. Ga Our ander, Maler, CPA is currently editing our facial s. To facute this audit, please confirm the balance de as of December 31, 1996, Mich is shown on our records as 28.08. Indicate in the space below whether this is in agreement with your records. If there are exceptions, please provide may information that will assist the editor in reconciling the difference. Please mall your reply directly to Miller, CPA. A camped, self- addressed cavclope enclosed for your convenience. Sincerely, 2. Make J. Hake, Controller Superior Wholesalia, Inc. To Miller, CPA: The amount shown above is correct as of December 31, 1996, except as follows: Ormond show there there for $25.000 vos malled on 17/17/05 Nanie H. Gales Position Controller Date 7/22/97 Nam Twice Nere a fun the confirmation was returned by the posts amrice of the der uchaster the location. C. Mar Superior Wholesaling, loss. izs Cereret d. Anyton, USA January 15, 1997 Hall Enterprises, Inc. SS Green Street Confirm #86 Gran Cley, USA Dear X. Nese Our auditor, Milker, CPA. Is curseully auditing our financial statement. To face dus audit, please confirm the balance de ws as of December 31, 1996, which is shown on our records as $2.000. Indicate in the space below whether this is in agreement with your records. If there are exceptions, please provide say Informacion that will assist the auditor in reconciling the difference Please mail your reply directly to Miler, CPA. A stamped, self- addressed covelope is enclosed for your convenience. Sincerely, J. Blake J. Blake, Controller Superior Wholesaling. lo.. To Miller, CPA: The amount shown above is correct as of December 31, 1996, cxcept as follows: Mailed the check Yer full amount on 1-3-97 merchandise was only received on 12-23-96 Name X. Hines Position Accountant Date 1-18-97