As part of the audit of KC Enterprises, the auditor assessed control risk for the existence and valuation assertions related to accounts receivable at the maximum level. Katie, the staff person assigned to the engagement, sent positive confirmation requests to a sample of the company customers based on their balances as of December 31, 2015. For each of the three customers described here, review the relevant confirmation letter and Katie's comments at the bottom of each. Select the procedure that should be followed to clear the exception, if one exists. Choose only one procedure per confirmation. A procedure may be used once, more than once, or not at all.
a.

b.

c.

Possible procedures:
1. Not an exception, no adjustment necessary. Determine the sufficiency of allowance for doubtful accounts.
2. Exception noted; propose adjustment and request that the controller post it to the accounting records.
3. Verify by examining subsequent cash collections and/or shipping documents.
4. Review appropriate documentation to verify that additional invoices noted on confirmation pertain to the subsequent year.

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February 1, 2016 Meehan Marine Sales, Inc. 1284 River Road Louisville, Kentucky 40059 Re: Balance at December 31, 2015-$267,000 As bf December 31, 2015, our records indicate your balance with our company as the amount listed above. Please complete and sign the bot- tom portion of this letter and return the entire letter to our auditors, GJ LLP Р.O. Box 100OrlandoFlorida 32806 , , A stamped, selfaddressed envelope is enclosed for your Sincerely KC Enterprises The above balance is Correct X Incorrect (show amount) $325,000 If incormect, please provide information that could help to reconcile your account. Response: We placed an order for $58,000 on December 26, 2014 Signature Title Date Katie's note to file Per discussion with the controller and review of relevant documentation, the order for $58,000 was shipped FOB shipping point on December 30, 2013, and was received by the customer on January 3, 2016 Therefore, the client has made no entry to record the sale in 2015 February 1, 2016 West Coast Ski Center, Inc. 163 Tide Avenue Monterey, California 93940 Re: Balance at December 31, 2015-$414,000 As of December 31, 2015, our records indicate your balance with our company as the amount listed above. Please complete and sign the bot tom portion of this letter and retum the entire letter to our auditors, GJ LLP P.O. Box 100, Orlando, Florida 32806 A stamped, selfaddressed envelope is enclosed for your convenience Sincerely KC Enterprises The above balance is Correct X Incorrect (show amount $320,000 If incorrect, please provide infomation that could help to reconcile your account Response: We made a payment of $94,000 on December 12, 2015 Signature Tite Date Katie's note to file Per discussion with the controller and review of relevant documentation, the company received the payment of $94,000 on December 15 2015, and posted it to "Other Income." February 1, 2016 Fish & Ski World, Inc. 5660 Ocean Blvd Port Arkansas, Texas 78373 Re: Balance at December 31, 2015-$72,000 As of December 31, 2015, our records indicate your balance with our company as the amount listed above. Please complete and sign the bot tom portion of this letter and retum the entire letter to our auditors, GJ LLP P.O. Box 100, Orlando, Florida 32806. (continued) A stamped, selfaddressed envelope is enclosed for your convenience Sicoly KC Enterprises The above balance is Correct X Incorrect (show amount) $163,000 If incormect, please provide information that could help to reconcile your account. Response: Per our records, the following invoices are outstanding: Invoice #4212 $72,000 Invoice #4593 $66,000 Invoice #4738 $25,000 Signature Title Katie's note to file: Per review of the A/R aging report, invoices #4593 and 4738 are not on the A/R aging report at December 31, 2015