You are a senior auditor at CPA LLP. This year, your audit client is Burnaby Wholesalers Ltd, a Canadian public listed firm that distributes building materials, hardware, gardening, and related products to retail stores that service the "do-it-yourself" home improvement market. The audit engagement team includes you, one engagement partner, three junior auditors, and two senior auditors. The fiscal year-end under audit is December 31, 2021. Prior to the current fiscal year, Burnaby Wholesalers was audited by another public accounting firm, but the client changed auditors in early June 2021 because management was dissatisfied with the predecessor audit firm's high audit fee and lack of timely service. During the audit of Burnaby Wholesalers, you encounter the following scenarios. Please respond to each scenario and include your discussions in one PDF document.

3. To audit the accounts receivable that is associated with customers in Ontario, as of the year ended December 31, 2021, 20 positive confirmation requests were sent to a random sample of the client's customers in Ontario by junior auditors. As of the year-end, the recorded accounts receivable includes 140 individual customer accounts. Of the 20 confirmations received from the customers, 15 had no exceptions noted. 5 confirmations suggest some inconsistencies as below. The junior auditors would like you to provide guidance on how to interpret the results from the accounts receivable confirmation and what is the dollar amount of identified misstatement. (12 marks) Account # D303 Amount $8,000 E836 $4,000 K628 $3,500 Customer's Comments Client's Comments We already paid the company No record of receiving the payment. $8,000 on October 10, 2020 and we don't owe anything. $1,000 of goods were returned We received returned goods on for credit on December 28, January 10, 2021 and reduced the 2020. So we owe only $3,000. customer's balance that day. The confirmation was returned We don't know what happened to and indicated as Address Not the customer and to that accounts Found. receivable. The balance is not material anyway. We paid this amount on We received payments on January 8, December 29, 2020. 2021, and the account was credited that day. The company has filed for Looks like this should be written off. bankruptcy and requests for We are surprised by this news. payment should be directed to The junior auditors further followed the company's trustee. up with the company's trustee, who acknowledged the existence of $10,000 debt but was not able to estimate the amount that the customer company could pay. F986 $9,000 A532 $10,000 3. To audit the accounts receivable that is associated with customers in Ontario, as of the year ended December 31, 2021, 20 positive confirmation requests were sent to a random sample of the client's customers in Ontario by junior auditors. As of the year-end, the recorded accounts receivable includes 140 individual customer accounts. Of the 20 confirmations received from the customers, 15 had no exceptions noted. 5 confirmations suggest some inconsistencies as below. The junior auditors would like you to provide guidance on how to interpret the results from the accounts receivable confirmation and what is the dollar amount of identified misstatement. (12 marks) Account # D303 Amount $8,000 E836 $4,000 K628 $3,500 Customer's Comments Client's Comments We already paid the company No record of receiving the payment. $8,000 on October 10, 2020 and we don't owe anything. $1,000 of goods were returned We received returned goods on for credit on December 28, January 10, 2021 and reduced the 2020. So we owe only $3,000. customer's balance that day. The confirmation was returned We don't know what happened to and indicated as Address Not the customer and to that accounts Found. receivable. The balance is not material anyway. We paid this amount on We received payments on January 8, December 29, 2020. 2021, and the account was credited that day. The company has filed for Looks like this should be written off. bankruptcy and requests for We are surprised by this news. payment should be directed to The junior auditors further followed the company's trustee. up with the company's trustee, who acknowledged the existence of $10,000 debt but was not able to estimate the amount that the customer company could pay. F986 $9,000 A532 $10,000