This case is designed to provide you with experience in performing further audit procedures related to some of the common substantive tests of balances for Accounts Payable.

Background:

You are performing the audit of Accounts Payable at your client Pinnacle Manufacturing, Inc..The "AP Population" tab of the workbook contains the full detail listing of the 519 accounts totaling $12.9 million recorded in accounts payable by the company at the end of the year.Confirmation requests were sent to the stratified sample of 51 of the 519 vendors listed on the "Confirmations - sent" tab of the workbook.Confirmations from 45 of these vendors were returned indicating no difference between the vendor's and the company's records.The tab of the workbook labeled "Confirmations - issues" contains the remaining six replies that indicate a difference between the vendor's balance and the company's records.The auditor follow up findings are indicated on each reply.

Requirements:

1. Using the tab in the workbook labeled "AP confirm analysis", record the differences from the six confirmations in tab "Confirmations - issues" and determine the amount of misstatement in the sample, if any, created by each issue.

2. Project the sample misstatements for each stratum to the total population of AP using ratio estimation (high volume items over $250,000; Large balance items $50,001 - $250,000; and Items $50,000 and less).

3. Aggregate the total projected misstatements and prepare the appropriate journal entry to fix the misstatement, if any.Make a conclusion about the fairness of the accounts payable balance recorded by the client assuming Tolerable Misstatement/Performance Materiality for AP is $150,000 and indicate what the clients options are based on your audit findings, if any.