Exhibit EP 14B-3 contains a working paper prepared by a junior audit team member to document the audit work performed on the longterm debt balance for Canadian Widgets Inc. Evaluate the working paper and list deficiencies it contains.

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БХНIBIT EP 148-3 CANADIAN WIDGETS INC. In dex KI Working Papers December 31 20X2 Initials Date Prepared by Approved by e Mar. 22, 20X Accrued Interest Bolonce Dec. 31, 20XI $ 50 000v Interest Bolance Poyable 2ох2 20X2 Interest Dec. 3, 20X2 Dec. 3L 20x2 Borrowings paid to Lender Rate Poyment Terms Collateral Re ductions Comments Dividend of $80,000 poid Sep. 2, 20x2 WP N-3) vidlates a provision of the debt ageement which thereby permits lender to demand O First Com- mercial Interest only on 25th of month, principal due in tull Jan. I, 20X4, по рrеpay ment pendity Irve ntories $30Q 000 A bn. 3120x2 $I00,000 Jun. 30,20х2 O $ 250,000 CX Dec. 25, 20X2 $2, 500 NR 12% Bank O Lender's Capital Coгp. Prime plus Interest oni y on last 2nd Mortgoge day of month, principal de in full Mor. 5, 2000 100,000 50,000 A 200,000 C Dec. 31,20X2 on Park St. Building 1% immedate poyment; lender has fuse dto wolve this violation. O Gigontic $5,000 principal plus interest due on Sth of mon th. due in full Dec. 13, 20X9 Ist Mortgage on Park St. Building Dec. 5,20X2 5,642 R 12% 720,000, 60,000 660,000 C Buldng & Loon Assoc. Prime rate was Due in full O J. Lott, majority shareholder 8% to 9% 0% Unseaured 300,000, 100,000 200,000 C during the year. Dec. 13, 20X5 $1, 310,000 T/B $8,N2T/B SL170,000 $350,000 $260,000 Tick mark legend F Re-odded, foots correcty. C Confirmed without e xce ption, W/P K-2. Cx Co nfrmed with exception, W/P K-3 NR Does not recompute correctly A Agreed to lo an ogre ement, validat ed bank depo sit ticket, and board of directors autho rization, WP W-7, Flve-year matu ritles (for disclosure purposes) e Agreed to cancelled cheques and lender's monthly statements N Agreed to cash disburs ements journal and oncelled cheques dated Dec. 3, 20X2, clearing Jan. 8, 20X3 T/B Traced to worki ng trial balance. Agreed to Dec. 31 20XL working papers. Agreed interest rate, term, andcollateral to copy of note and loan agree ment. * Agreed to concelled cheques and board of directors autho rization, WP W-7. Reclassification entry for current portion proposed (see RIE-3) Interest costs for long-tern debt Interest expense for year Averoge loan balon ce outstanding $ 281,333 T/B $1,06,667R Yearend Dec. 31, 20X3 $ 60,000 Borrowed Dec. 31, 20X4 Dec. 31, 20X5 Dec. 31, 20X6 Dec. 31, 20X7 The reafter 260,000 260,000 310,000 60,000 360,000 odditional $100,000 from J. Lott on Jan. 7, 20X3 $1,30,000 Overall Conclusions Long-term debt, accrued interest payable, and interest expense are correct and complete at Dec. 31 20X2.