You have completed your degree, successfully passed your CPA exam, gained the necessary experience and obtained your CPA license. Congratulations! After gaining management experience and careful contemplation, you have decided to start your own CPA firm which you have named [Luffyco], CPA & Associates located here in Saginaw. CPA & Associates were hired to complete an integrated audit of North, LLC. for their fiscal year ended October 31st, 2021. The previous fiscal year was audited by another reputable CPA firm which gave an unqualified opinion. You have elected to not include their audit report with the comparative financials for 2020. During the audit, the following is noted but you do not see it reflected in North's financial statements, footnotes and / or disclosures:

North's new Executive VP of Business Finance and Board of Director member (though not included on Audit Committee) was a former partner at the predecessor audit firm. He provided consulting services (of $14,000 and $4,250 in fees in 2017 & 2018 respectively, amounts are considered immaterial) while working for the audit firm prior to accepting his new position in early 2021.During 2021, North acquired a new company (in its entirety) with several new locations all of which used straight-line to depreciate their assets for both tax and financial statement purposes. All existing North locations used double-declining depreciation. Based on consultation with tax and fixed asset management, the decision to change depreciation methodology at the beginning of the current fiscal year (2021) from double-declining to straight-line for existing plant and equipment was made. The effect of this change on prior years was immaterial as majority of existing plant and equipment would have been (or was close to) fully depreciated under straight-line. You support management's position as this change makes all locations consistent in depreciation methodology, taking into consideration the new acquisition locationsNorth currently recognizes all revenue associated with product sale at time of shipment regardless of customer shipping terms. You noted this also includes 100% of warranty revenue which is charged at 10% of product price. North's average monthly sales was $1,030,000 for FY21, $997,500 for FY20 and $992,000 for FY19. Sales are relatively flat period-to-period particularly in the third quarter (August - October). You obtained the following breakdown regarding warranty: FY21: 96% of issues occur and were addressed within the first 30 days of shipment, next 2.8% are within 60 days, then 1% within 90 days and last 0.2% are within 1 year of shipment. FY20: 95.7% of issues occur and were addressed within the first 30 days of shipment, next 3.0% are within 60 days, then 1.1% within 90 days and last 0.2% are within 1 year of shipment. FY19: 95.8% of issues occur and were addressed within the first 30 days of shipment, next 2.9% are within 60 days, then 1.1% within 90 days and last 0.2% are within 1 year of North factored $625,000 of Accounts Receivable and continues to include them within their balance sheet. This amount is considered material for NorthNorth has purchased a number of smaller acquisitions over the last nine years resulting in Goodwill being recorded on the books. In 2020, North began a restructuring / reorganization which resulted in several brands being eliminated based on recommendations to streamline their product offering and image. As a result, you feel the Goodwill associated with these brands needs to be eliminated or at least re-valued in part as the legacy names no longer exist on the company websites other than on the About, History and Archive News webpages. If searched, customers are immediately redirected to the remaining brands. North disagrees this stating customers are still able to get to their websites based on these legacy brand searches and feels no elimination or re-valuation of Goodwill is needed. Total goodwill associated with eliminated brands $1.17 million.INAL REVIEW: Based on your review of the audit team's workpapers including summary of audit adjustments and the final evidential evaluation procedures, no other material misstatements were noted. You conclude there were no pervasive material misstatements in the specific situations noted above. The ICFR audit was based on the 2013 COSO framework and no material weaknesses were identified. 

REQUIRED: 

1. Using all the information provided, Prepare your company's formal Audit Report for the integrated audit completed addressed to North's BoD, dated December 5th, 2021, to accompany the 2020-2021 comparative financial statements. 

2. After the end of the Audit Report (NOTE: insert so on next page in Word doc) and for each of the items above, LIST each item by giving a brief descriptor (not just a number please) and Briefly Explain either why item was included in Audit Report OR why the item was not / did not need to be included in Audit Report

 
 
 
 

Answer rating: 100% (QA)

1 RE PORT ON THE INT EG R ATED AUD IT OF NOR TH LLC To the Board of Directors of North LLC We have aud ited North LLC s financial statements for the fiscal year ended October 31 2021 and we are issuin... View the full answer