Overview
Auditing/2 sheets Excel/Apollo Mini Case
(Complete B-0 and B-1sheets)
(Answers are below)
(MUST INPUT FORMULAS INSIDE CELLS FOR B-1)
“Complete all the steps on the audit program for B-0 and B-1. Be sure to document your work using the designated tick marks. The tick mark legend is located at the bottom of each work paper. The excel sheet is attached at the bottom.”
1. These are the answers for sheet B-0...just put them in your own words.
| Step | Instruction | WP Ref | Related Assertions | Performed By | Comments |
| 1 | Complete engagement materiality memo | A-5 | — | TC | Materiality appears reasonable because it uses standard industry benchmark of 5% of adjusted net income, applied consistently. Current-year loss is large, so net income is the most conservative base. |
| 2 | Obtain 2019 & 2020 TBs and prepare PreAP (B-1) | B-1 | — | TC | Completed per uploaded trial balances |
| 3 | Cross-reference PAP to TB and foot amounts | B-1 | — | TC | All balances tie to TB (TB tick marks applied) |
| 4 | Investigate any change ≥10% or > planning materiality | B-1 | — | TC | Significant changes identified (highlighted on B-1): • Accounts Receivable • Inventory • Retained Earnings • Loss on Legal Settlement • Warranty Expense |
| 5 | Select three significant changes to investigate and provide hypotheses | B-1 | — | TC | Completed — See A, B, and C hypotheses at bottom of B-1 |
2. These are the answers for sheet B-1...(MUST INCLUDE FORMULAS INSIDE OF EACH CELL..SIMPLE SUBTRACTION/DIVISION).
| Account ID | Account Description | 2019 | 2020 | Raw Change (CY-PY) | % Change | Tick-mark |
| 10100 | Cash on Hand | 1,987 | 2,275 | 288 | 14% | M |
| 10200 | Regular Checking | 198,117 | 557,126 | 359,009 | 181% | E |
| 10300 | Payroll Checking | 0 | 0 | 0 | 0% | M |
| 10400 | Savings Account | 3,044,958 | 3,645,599 | 600,641 | 20% | E |
| 11000 | Accounts Receivable | 16,410,903 | 51,515,260 | 35,104,357 | 214% | E |
| 11400 | Other Receivables | 0 | 1,250,000 | 1,250,000 | +1,250,000% | E |
| 11500 | Allow. Doubtful Accts | (1,262,820) | (1,239,010) | 23,810 | (-2%) | M |
| 12000 | Inventory | 18,825,205 | 67,724,528 | 48,899,323 | 260% | E |
| 12300 | Inv. Obsolescence Reserve | (3,012,000) | (846,000) | 2,166,000 | (-72%) | E |
| 14100 | Prepaid Insurance | 743,314 | 3,424,214 | 2,680,900 | 361% | E |
| 14300 | Office Supplies | 7,407 | 8,540 | 1,133 | 15% | M |
| 15000 | Land | 117,000 | 117,000 | 0 | 0% | PY |
| 15100 | Buildings/Land Improve. | 623,906 | 674,314 | 50,408 | 8% | M |
| 15200 | Machinery/Equip. | 433,217 | 2,929,097 | 2,495,880 | 576% | E |
| 17000 | Accum. Depreciation | (163,500) | (610,000) | –446,500 | +273% | E |
| 19000 | Investments | 572,691 | 1,998,780 | 1,426,089 | 249% | E |
| 19900 | Other Non-current Assets | 53,841 | 53,841 | 0 | 0% | PY |
| 20000 | Accounts Payable | (4,633,118) | (1,922,096) | 2,711,022 | (-59%) | E |
| 23122 | Income Tax Payable | (14,289) | (87,569) | –73,280 | 513% | E |
| 23300–23900 | Payroll Liabilities (various) | immaterial accounts (all < 125k) | M | |||
| 24100 | Line of Credit | (10,000,000) | (44,403,000) | –34,403,000 | 344% | E |
| 27000 | Notes Payable-Long-Term | (7,423,000) | (12,000,000) | –4,577,000 | 62% | E |
| 39005 | Retained Earnings | (2,219,620) | (6,171,559) | –3,951,939 | 178% | E |
| 40000 | Sales | 246,173, (approx) | 242,713,453 | –3,460,000 | –1% | M |
| 41000 | Sales Returns | 4,497,583 | 11,100,221 | 6,602,638 | 147% | E |
| 42000 | Warranty Expense | 1,100,281 | 1,158,128 | 57,847 | 5% | M |
| 50010 | Cost of Goods Sold | 141,569,222 | 130,196,645 | –11,372,577 | -8% | E |
| 66000 | Legal & Professional | 3,605,134 | 4,913,224 | 1,308,090 | +36% | E |
| 67000 | Bad Debt Expense | 1,622,426 | 0 | –1,622,426 | –100% | E |
| 77500 | Admin Wages Expense | 16,875,306 | 16,197,225 | –678,081 | –4% | M |
| 78500 | Income Tax Expense-Fed | 2,025,000 | 8,900,000 | 6,875,000 | 339% | E |
| 78510 | Income Tax Expense-State | 365,000 | 3,100,000 | 2,735,000 | 749% | E |
| 80000 | Loss Legal Settlement | 19,172,000 | 0 | –19,172,000 | –100% | E |
3. These are the answers for Part 3 of B-1….put them in your own words
Bottom Section (A, B, C Relationships & Hypotheses)
- A) Accounts Receivable ↑ +214% while Bad Debt Expense ↓ -100%
- Hypotheses
1️⃣ Credit approval standards may have been loosened → higher credit sales but not writing off uncollectible items.
2️⃣ Allowance for Doubtful Accounts may be understated → RMM increases (valuation assertion). - B) Inventory ↑ +260% while COGS only ↓-8%
- Hypotheses
1️⃣ Possible over-production or obsolete inventory sitting on shelves → valuation error.
2️⃣ Inventory quantities not properly adjusted at period-end.
RMM: Increase (existence/valuation) - C) Legal Expense ↑ +36% and Increase in Income Tax Expense
- Hypotheses
1️⃣ Legal settlement activity in 2020 may relate to ongoing contingencies not disclosed.
2️⃣ Significant regulatory or litigation exposure indicating loss accrual may be incomplete.
RMM: Increase (completeness & disclosure assertions)
3.
INPUT THESE ANSWERS AND MAKE SURE YOU SEND THE "SAME EXCEL SHEET BACK TO ME"