Windsor Wine Tours (WWT) was founded ten years ago by Julia Bogai, a local artist and entrepreneur. WWT provides guided wine tours and operates out of Amherstburg, Ontario. Julia is the president and her daughter, Mila, is actively involved in WWT's operations as an Assistant Manager.

WWT's bookkeeping have always been prepared internally by the company's office assistant who studied Office Administration at St Clair College. WWT's fiscal year-end is October 31. I

n August 2020, Julia met Brandon Ouellette, a partner at Ouellette and Partners LLP (O&P), at a mutual friend's social distanced wedding and eventually decided to hire O&P as their auditor. Recently WWT had to make a major asset purchase to meet all the demand and required a loan as Julia had been spending all her previous years profits on her love for art. She mentioned that the bank's major concern was if she would be profitable enough to repay the loan from WWT's operations.

It is now December 14, 2020. You the audit intern, work for O&P. Brandon calls you on Microsoft Teams to discuss your workload while he will be away violating the lockdown by visiting the Swiss Alps for the holidays. He would like you to draft an audit planning memo for the potential engagement with WWT and ensure you have everything ready to hit the ground running when he returns. He also thought it would be a good idea to get a head start on the Management Letter as well, which he asked you to draft.

Before you leave the call, the partner mentions that Julia's creative side really showed when they met, and he had encouraged her to expand her business to paint parties. Julia had invited O&P to be her first virtual painting party, so this years Christmas party would be a "Sip N' Swirl" night hosted by WWT while touring wineries. Julia's also been gracious enough to provide O&P with 5% commission for any of their referrals to WWT's new business.

You have gathered information from Julia (Appendix I) and WWT's new office assistant (Appendix II).

APPENDIX I

INFORMATION GATHERED FROM JULIA BOGAI

In November 2019, WWT received an interest-free and forgivable government loan of $20,000. The loan agreement states that WWT tours must include at least 25% organic winery visits. Annual compliance is required and will result in loan forgiveness in annual amounts of $5,000. Julia complained how she could not meet this requirement as all the good wineries use chemicals to help grow in Windsor-Essex's harsh soil conditions.

There is no municipal garbage disposal service around WWT's route's and WWT has always carefully emptied the extra wine into none ERCA protected areas. Recently, ERCA officials became aware of WWT's practices and deemed they were in fact protected areas and would be in trouble. Julia contacted her lawyers and was informed that $15,000 fines have been levied in similar cases and was probable. The office assistant has not recorded a liability for the fine because the fine paperwork had not been finalized yet.

Julia mentioned that her bank balance never agrees to the reports she is given by office assistant, she complained it makes her life difficult to determine how much money she has left to spend on her passion for art at the end of the month.

Lastly, she brought up her concerns about having to pay so much money to make sure her business was running properly without fraud. The bank requested WWT have an assurance engagement every year-end.

APPENDIX II

INFORMATION GATHERED FROM OFFICE ASSISTANT

Pre-tax income is projected to be $15,000 in fiscal 2020 with $500,000 of Revenue and $50,000 of Assets. All income earned consists solely of tour revenue.

WWT's new office assistant has been with the company for five weeks. The previous office assistant was responsible for many bookkeeping functions as well as writing cheques. Since the new office assistant was hired, Mila now reviews the bank reconciliations, reviews all disbursements, and checks the account postings for accuracy. The previous bookkeeper was responsible for all these functions in addition to performing the bank reconciliations and account postings. Julia is now the only person with cheque signing authority and always examines supporting documentation carefully.

For all wine tours, the customers send in a standard Tour Application Form (TAF) that details the excursion selected and the price of the excursion. Mila or the bookkeeper reviews the form and sets up the excursion. Either Mila or the bookkeeper collects payment by cash card as soon as customers arrive at the lodge. Revenue is recognized upon receipt of payment. WWT began requesting deposits from new customers in August 2020 upon receipt of the TAF because some groups did not show up for excursions. Deposits of $45,000 have been received and recorded as revenue for trips commencing on or after November 1, 2020. There have also been noted issues with the TAF's received not always being found when the customer takes their tour, resulting in overcrowded buses.

The office assistant flaunted that she used to work your job at O&P during her summer's at St Clair College. She talked about how she missed the group but dreaded the long hours during tax season. Although she did not mind preparing the taxes for WWT, it was a big reason she got hired and helped land her dream job in industry.

Finally, the office assistant brought up all the wine Julia's been buying to resell. She just keeps buying more and more during each trip as a new revenue stream to resell when it is older and more valuable. The office assistant said she lost track and is not entirely sure how much is really sitting in the basement cellar but is pretty sure she accounted for it all while doing the bank reconciliations.