The long-term debt working paper in Exhibit DC14-5 was prepared by client personnel and audited by AA, an audit staff assistant, during the calendar year 20X2 audit of Canadian Widgets Inc., a continuing audit client. You are the engagement supervisor, and your assignment is to review this working paper thoroughly.

Required:
Identify and prepare a list explaining the deficiencies that should be discovered in the supervisory review of the long-term debt workingpaper.

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EXHIBIT DC14-5 CANADIAN WIDGETS, INC. Working Papers December 31, 20X2 Index Prep AA 3/22/X2 Approved 20X2 Borrowings 20X2 Reductions Interest ayable 12/31/X2 Interest Balance 12/31/X1 Balance 12/31/X2 erest paid to er Payment Terms Collateral Comments st Com mercial Bank $300,000 A $100,000 6/30/X2 Interest only on Inventories $50,000 $ 250,000 CX 12/25/X2 $2,500 NR 1/31/X2 $80,000 paid 25th of month, principal due in full 1/1 /X6, no prepayment N-3) violates provision of en which thereby permits lender to demand immediate payment; lender has refused to waive this violation Ф Lender's Prime plus Interest only on last 2nd Mortgage 100,000 50,000 A 200,000 C 12/31/02 day of month principal due in full 3/5/X4 on Park St. Building gantic 12% $5,000 principa 1st Mortgage 720,00 60,000 660,000 C 12/5/02 5,642 R plus interest due on Park St. on 5th of month 12/31/X13 Due oc Prime rate was J. Lott, 8% to 9% during year. Unsecured 300,000 100,000 N 200,000 C 12/13/X5 shareholder $1,170,000 $350,000 $260,000 $1,310,000 T/B 142 T/B Tick-mark legend F Readded, foots correctly c confirmed without exception, w/P K-2 CX Confirmed with exception, W/P K-3 NR Does not recompute correctly A Agreed to loan agreement, validated bank deposit ticket, and board of directors authorization, W/P W-7. Five year maturities (for disclosure purposes) e Agreed to cancelled cheques and lender's monthly statements N Agreed to cash disbursements journal and cancelled cheques dated 12/31X2, clearing 1/8/X3 Reclassification Interest costs for long-term debt Interest expense for year Average loan balance outstanding $1,406,667 R entry current portion proposed or $281,333 TIBCU Year end 12/31/X3 60,000 260,000 260,000 310,000 Borrowed 12/31/X4 12/31/X5 12/31/X6 12/31/X7 additional $100,000 from J. Lott on 1/7/X3 T/B Traced to working trial balance Agreed to 12/31/X1 working papers. Agreed interest rate, term, and collateral to copy of note and loan agreement Agreed to cancelled cheques and board of director's authorization, W/P W-7 Thereafter 360,000 $1.310,000 Overall Conclusions Long-term debt, accrued interest payable, and interest expense are correct and complete at 12/31/X2