This is an Acco 465 case i need solution for it

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PARK-IT

Park-it is a privately owned company that owns and operates parking lots in Toronto, Montreal, and

Vancouver. Th e parking lots are all located in prime downtown space. Given the shortage of parking

in these cities, Park-it has been able to charge signifi cant daily rates over the past few years and has

enjoyed a heft y profi t, given the low operating costs.

Th e owner of Park-it, Alex Park, met with an audit partner from your fi rm in December 31,

2012, to discuss the possibility of your fi rm conducting an audit on the fi nancial statements. Park-it's

year end is December 31. Previously, Park-it's fi nancial statements were prepared by the accounting

manager with no outside assistance or assurance. However, Alex now wants more assurance that the

numbers are correct. "I trust Jim, my accountant; however, this isn't the small company that it used

to be. Years ago we would charge $5 per day for cars to park in our lots. Today, the going rate is $30

a day and $5 for each half hour." Aft er some discussion as to whether an audit or review engagement

would be more appropriate, Alex indicated he wanted the highest level of assurance and therefore, at

the conclusion of the meeting, the partner agreed to accept the audit engagement.

Subsequent to the meeting, the partner provided you, CA, with his notes (Exhibit 1) about the

parking lot operations and asks you to draft a memo to fi le addressing general audit planning issues

and a list of proposed audit tests that will need to be done related to revenue. He knows he has not

asked all of the questions necessary, so he wants a list of additional information before the audit

plan can be fi nalized.

Intermediate Cases 87

EXHIBIT 1

NOTES FROM MEETING WITH ALEX PARK:

1. Revenue has been fairly consistent over the past three years. All lots are approximately the

same size (250 spaces) and historically have generated approximately the same amount of

revenue. However, Alex noticed that this year the Montreal lot has had a 25% decrease in

revenue and he does not know why.

2. Details regarding each lot are as follows:

Th e Toronto Lot

Th is is the most automated of the three lots.

No attendant is on site.

An automatic paying process is used.

A gate has been installed which opens when the driver pulls up and takes a ticket

from the machine.

Upon leaving, the driver must use the payment kiosk to pay. Th e parking charge is automatically

calculated by the system, based on an hourly rate and the daily maximum

rate. Th e driver inserts an unpaid ticket and pays by either cash or a credit card. Th e

card is automatically verifi ed with the bank if a credit card is used, to ensure the card

is valid and that enough credit is available.

Upon leaving the lot, the driver inserts the paid card into the machine and the gate

opens.

If the drivers have any problems, they can press a button at the entrance and can

speak to an attendant who is "on call." Th e attendant can open the gate from a remote

site, if needed.

Th e Vancouver Lot

No attendant is on site.

Th e driver pulls into the un-gated lot and buys a ticket from the ticket payment machine.

Charges will vary depending on how many minutes the driver pre-purchases,

with the minimum time being 15 minutes. Th e parking charge is automatically calculated

by the system, based on an hourly rate and the daily maximum rate. Th e driver

can pay by either cash or credit card. If a credit card is used, the card is automatically

verifi ed with the bank to ensure the card is valid and enough credit is available to pay.

Aft er payment is received, the machine issues a ticket to the driver. Th e ticket indicates

the expiry time and the amount paid.

Th e driver leaves the paid ticket on the dashboard.

A security company has been contracted to check fi ve times a day at random times to

make sure that no one who did not purchase a ticket is parked in the lot, and that no

one has stayed longer than the amount of time paid for. If they fi nd such a car, they issue

a "parking ticket." Alex noted that these tickets are rarely paid, given that they are not

issued by the police. Th e security company has been instructed to have a car towed if

they continually park without paying.

88 CHAPTER 4

Th e Montreal Lot

Th is lot is the least automated of the three.

Th ere is a 24-hour attendant who is located in a booth at the entrance.

Th ere are 3 attendants who each work 8-hour shift s from Monday to Friday.

Saturday and Sunday shift s are covered by 8 part-time staff who work 6-hour shift s.

When the driver enters the lot, the attendant gives the driver a ticket with the time

manually written on it. When the driver leaves, the attendant writes down the time

and manually calculates the amount owing. Cash is the only form of payment. Th e

attendant keeps the tickets although nothing is done with them