A - Planning

perform some procedures required as a part of audit planning. For ease your audit manager has already organized the workpapers and completed several of the required workpapers.

2019 Thal Balance PBC Apollo Shoes, Inc Trial Balance (Audited) 31-Dec-19 AccountID Account Description Debi Credit Single Column format 0100 Cash on Hand $1,987.28 $1,987 .28 10200 Regular Checking Account $198,116.52 $198,116.52 10300 Payroll Checking Account $0.00 $0.00 10400 Savings Account $3,044,958.13 $3.044,958.13 11000 Accounts Receivable $16,410,902.71 $16,410,902.71 11500 Allowance for Doubtful Accounts $1,262,819.88 ($1,262,819.88) 12000 Inventory - Spotlight $18,825,205.24 $18,825,205.24 12300 Reserve for Inventory Obsolescence $3,012,000.00 ($3,012,000.00) 14100 Prepaid Insurance $743,314.38 $743,314.38 14200 Prepaid Rent $200,000.00 $200,000.00 14300 Office Supplies $7.406.82 $7.406.82 14400 Notes Receivable-Current $0.00 14700 Other CurrentAssets $0.00 15000 Land $117,000.00 $117,000.00 15100 Buildings and Land Improvements $623,905.92 $623,905.92 15200 Machinery, Equipment, Office Furniture $433,217.10 $433,217.10 17000 Accum. Depreciation $163,500.00 ($163,500.00) 19000 Investments $572,691.08 $572,691.08 19900 Other NoncurrentAssets $53,840.59 $53,840.59 20000 Accounts Payable $4,633,118.09 ($4,633,118.09) 23100 Sales Tax Payable $0.00 $0.00 23200 Wages Payable $29,470.32 ($29,470.32) 23300 FICA Employee Withholding $1,318.69 ($1,318.69) 23350 Medicare Withholding $583.99 ($583.99) 23400 Federal Payroll Taxes Payable $6,033.01 ($6,033.01) 23500 FUTA Tax Payable $0.00 23600 State Payroll Taxes Payable $2,815.47 ($2,815.47) 23700 SUTA Tax Payable $0.00 23800 FICA Employer Withholding $1,318.69 ($1,318.69) 23900 Medicare Employer Withholding $583.99 $583.99) 24100 Line of Credit $10,000,000.00 ($10,000,000.00) 24200 CurrentPortion Long-Term Debt $0.00 24700 Other CurrentLiabilities $0.00 27000 Notes Payable-Noncurrent $0.00 39003 Common Stock $6,105,000.00 ($8,105,000.00) 39004 Paid-in Capital $7,423,000.00 ($7 ,423,000.00) 39005 Retained Earnings $2.219,620.65 ($2,219,620.65) 40000 Sales $246,172,918.44 ($246,172,918.44) 41000 Sales Returns $4.497,583.20 $4.497,583.20 42000 Warranty Expense $1,100,281.48 $1,100,281.48 45000 Income from Investments $0.00 $0.00 46000 Interestincome $204,302.81 ($204,302.81) 50010 CostofGoods Sold $141,569,221.61 $141,569,221.61 57500 Freight $4,302,951.46 $4,302,951.46 60000 Advertising Expense $897,140.01 $897,140.01 61000 Auto Expenses $208,974.39 $208,974.39 62000 Research and Development $31,212,334.17 $31,212,334.17 64000 Depreciation Expense $133,000.00 $133,000.00 64500 Warehouse Salaries $4.633,383.82 $4,633,383.82 65000 Property Tax Expense $80.495.32 $80.495.32 66000 Legal and Professional Expense $3,605,133.96 $3,605,133.96 67000 Bad DebtExpense $1,622,425.99 $1,622,425.99 68000 Insurance Expense $853,942.65 $853,942.65 70000 Maintenance Expense $61,136.04 $61,136.04 70100 Utilities $135,642.99 $135,642.99 70110 Phone $76,373.78 $76,373.78 70120 Postal $128,033.21 $128,033.21 71000 Miscellaneous Office Expense $17,023.27 $17,023.27 72000 Payroll Tax Exp $1,550,989.06 $1,550,989.06 73000 Pension/Profit-Sharing Plan Ex $3,000,000.00 $3,000,000.00 74000 Rentor Lease Expense $2,603,485.87 $2.603,485.87 77500 Administrative Wages Expense $16,875,305.98 $16,875,305.98 78000 InterestExpense $875,000.00 $875,000.00 78500 Income Tax Expense - Federal $2,365,000.00 $2,365,000.00 78510 Income Tax Expense - State $429,000.00 $429,000.00 80000 Loss on Legal Settlement $19,172,000.00 $19,172,000.00Apollo Shoes, Inc PBC Preclosing Trial Balance A-2 31-Dec-20 AccountID Account Description DebitAmt Cred it Amt Single Column format 10100 Cash on Hand $2 275 .23 $2 275 23 10200 Regular Checking Account $557.125.92 $557.125.92 10300 Payroll Checking Account $0.00 10400 Savings Account $3 .645 .599.15 $3 645 599.15 11000 Accounts Receivable $51 515 259 98 $51 515 259.98 1 1400 Other Receivables $1 250 000.00 $1 250 000 00 11500 Allowance for DoubtfulAccounts $1 239 009.75 ($1 239 009.75) 12000 Inventory $67.724 52750 $67,724 52750 12300 Reservefor Inventory Obsolescence $846000.00 ($846 000 00) 14100 Prepaid Insurance $3 424213.78 $3 424.213.78 14200 Prepaid Rent $0.00 14300 Office Supplies $8 540.00 $8 540.00 14400 Notes Receivable-Current $0.00 14700 Other CurrentAssets $0.00 15000 Land $117 000 00 $117 000.00 15100 Buildings and Land Improveme $674313.92 $674313.92 15200 Machinery . Equipment, Office Fi $2929 097.13 $2929097.13 17000 Accum. Depreciation $610 000.00 ($610 000.00) 19000 Investments $1 998 .780 39 $1 998 .780 39 19900 Other NoncurrentAssets $53.840 59 $53 .840 59 20000 Accounts Payable $1922 09591 ($192209591) 23100 Sales Tax Payable $0.00 23200 Wages Payable $0.00 23300 FICA Employee Withholding $8 439.65 ($8 439 .65) 23350 Medicare Withholding $11 414.99 ($11 414.99) 23400 Federal Payroll Taxes Payable $118 086.12 ($118 086.12) 23500 FUTA Tax Payable $0.00 23600 State Payroll Taxes Payable $55 106.86 ($55,106.86) 23700 SUTA Tax Payable 50.00 23800 FICA Employer Withholding $8 439.65 ($8 439.65) 23900 Medicare Employer Withholding $11414.99 ($11 41499) 24100 Line of Credit $44 403 000.00 ($44 403 000.00) 24200 CurrentPortion Long-Term Debt $0.00 24700 Other Current Liabilities $0.00 27000 Notes Payable-Noncurrent $12 000 000 00 ($12 000 000 00) 39003 Common Stock $8 105 000 00 ($8 105 000 .00) 39004 Paid-in Capital $7 423 000.00 ($7 423 000 00) 39005 Retained Earnings $6 590.483.64 ($6 590 483.64) 40000 Sales $242.713 452.88 ($242,713 452.88) 41000 Sales Returns $11,100 220.89 $11,100 220.89 42000 Warranty Expense $1.158.128 47 $1.158 .128 47 45000 Income from Investments $142608931 ($1 426 08931) 46000 Interest Income $131 881 46 ($131 881 46) 47000 Miscellaneous Income $2 166 000.00 ($2 ,166000 00) 50010 Costof Goods Sold $130.196 .645 26 $130.196.645 26 57500 Freight $4 240 .263.09 $4 240.26309 60000 Advertising Expense $1036 .85401 $1 03685401 61000 Auto Expenses $210 502.80 $210 502.80 62000 Research and Development $528 870 44 $528 870 44 64000 Depreciation Expense $446 000 00 $446.000.00 64500 Warehouse Salaries $4.720.715 56 $4.720.715 56 65000 Property Tax Expense $99 332.45 $99 332 .45 66000 Legaland Professional Expense $4913 224.45 $4913 224.45 67000 Bad DebtExpense $0.00 68000 Insurance Expense $36,106.92 $36.106.92 70000 Main ten ance Expense $35 502.87 $35 502.87 70100 Utilities $137 332.18 $137 332.18 70110 Phone $52 599.02 $52 599.02 70120 Postal $77 803.61 $77 .80361 71000 Miscellaneous Office Expense $24.891.82 $24.891.82 72000 Payroll Tax Exp $1 577 811.85 $1 577 811 .85 73000 Pension /Profit-Sharing Plan Ex $3 630 375.80 $3 630 375.80 78600 Controllers' Clearning Account $330.375.80 ($330 375 .80) 74000 Rentor Lease Expense $1 20657400 $1 206 57400 77500 Administrative Wages Expense $16.197 225 .43 $16.197 225 .43 78000 Interest Expense $2 591,73650 $2 591,73650 78500 Income Tax Expense - Federal $8 900 000.00 $8 900 000 00 78510 Income Tax Expense- State $3.100 000 00 $3 100 000.00 $330.119 29101 $330119 29101Apollo Shoes, Inc Prepared by: DW 2019 10-K and assorted documents Reviewed by: AA 31-Dec-20 This WP includes several documents considered critical to the audit planning process. Apollo 2019 10-K See additional materials The following items could be noted by the student to be of significance to the audit: Information Relevant to 2020 Audit Audit Action Recommended January 06, 2020 Larry Lancaster, Chairman, President, and CEO is a new hire. - Investigate Larry's background? Apollo CEO Letter to Sales expected to increase 10% - Note for analytic review of expenses Shareholders See additional materials COGS and exp. to remain constant - Note for analytic review of expenses Authorized purchase of $1.3 million in equipment. - Vouch to supporting documentation, trace to PP&E workpapers. ST credit refinanced, rolled into LT N/P - Note for liabilities work; ensure proper accounting and disclosure. Officers' salary increase 10% - Note for payroll analytic procedures Cost of Superbowl ad rose 10% ($1 million). - Note for review of expenses June 30, 2020 Apollo Organization Chart See additional materials Damages from "Nor'easter" cost $50,000. - Should be treated as repair, rather than capital addition Company raised prices 10% to meet expectations - Examine reasons for not meeting goals Stopped R&D on Phoneshoe. - Implications for intangible assets? Postage and telephone expense saved through e-mails - Note for analytic procedures involving expenses. Write-off A/R for $23,810.13. - Was that the only write-off? Advanced $1.25 million to Larry Lancaster's secretary (personal) - Related party transaction should be disclosed in footnotes. 1% interest Authorized $1 million for purchase of computer systems. - Verify purchase. Board of Directors and Audit Authorized $44,403,000 draw on LOC. - Verify the accounting for the liability. Committee Meeting Minutes See additional materials January 6, 2021 Anderson, Olds, and Watershed hired (fee $750,000)X-1 - Fee should be included in Professional Expenses Approved cash dividend ($860,000) (disbursed 03/01/21 for SH of record 12/31/20) - Dividend should be accrued. Reported a $12 million negligence suit - Contact client attorneys, possible contingent liability. Machinery purchased in early 2017 not operational - Check on status. Approved bonuses for 12/31/20 - $450,000 bonuses should be accrued at 12/31/20 Email from CAE and info See additional materials Company approved $3,300,000 contribution to EBP - Note for footnotes. No Superbowl ad this year - Note for analytic procedures about new computer systemSigned Engagement Letter A-4 Apollo Shoes, Inc. 12/31/20 October 26, 2020 Mr. Larry Lancaster, Chairman Apollo Shoes, Inc. Shoetown, ME Dear Mr. Lancaster: This will confirm our understanding of the arrangements for auditing Apollo Shoes, Inc. financial statements for 2020. We will audit the balance sheet at December 31, 2020, and the related statements of income, retained earnings, and cash flows for the year ending that date. Our audit will be made in accordance with the Standards of the Public Company Accounting Oversight Board and will include such tests of the accounting records and such other auditing procedures as we consider necessary. Our audit will be based on samples of recorded transactions. We will plan the audit to detect material errors and frauds that may affect your financial statements. Our work, however, is subject to the unavoidable risk that errors, frauds, and illegal acts, will not be detected. We expect to obtain reasonable, but not absolute, assurance that major misstatements do not exist in the financial statements. Our findings regarding your system of internal control, including information about significant deficiencies and material weaknesses, will be reported to the audit committee of your board of directors in a separate letter at the close of the audit. At your request, but pending approval by your Board of Directors, we will prepare all required federal tax returns and the state franchise tax returns. We will provide your staff with a list of schedules needed by our staff during the audit. The delivery dates have been discussed and mutually agreed upon. We understand that your staff will prepare all the schedules in the package, all the financial statements and notes thereto, and the Form 10-K for our review. The scope of our services does not include preparation of any of these financial statements. Ms. Darlene Wardlaw will be the manager in charge of all work performed for you. She will inform you immediately if we encounter any circumstances that could significantly affect our fee estimate of $750,000 discussed with you on October 17, 2020. She is aware of the due date for the audit report, March 15, 2021. You should feel free to call on her at any time. If the specifications above are in accordance with your understand of the terms of our engagement, kindly sign below and return the duplicate copy to us. We look forward to serving you as independent public accountants. Accepted by_ /s/ Larry Lancaster Date 11/02/2020Apollo Shoes A-5 ENGAGEMENT MATERIALITY Prepared by (Required for all engagements) Reviewed by CLIENT: Apollo Shoes PERIOD ENDED: December 31, 2020 This completed form must be provided to the engagement quality control reviewer in the planning stage of every audit. Please complete all the cells highlighted in yellow. PLANNING MATERIALITY CALCULATION Only if the currentyear net income (loss) (or other measure) is significantly differentfrom the entity's historical results would 2-year averaging to obtain normalized net income (loss) (or other measure) be appropriate. PROFIT ORIENTED ENTITIES Current Year Prior Year Netincome (loss) Plus (minus) unusual, non-recurring revenues and expenses, and extraordinary items. ADJUSTED NET INCOME (LOSS) Adjusted net income ( loss) multiplied by: 5% Current Year TOTAL ASSETS Total assets multiplied by : 19% Current Year TOTAL REVENUES Plus ( minus) unusual, non-recurring revenues ADJUSTED REVENUES Total adjusted revenues multiplied by: 1%1. Financialdata source (Le. actual, budget, Year end trial balance, actual data obtained from client projection) : 2. Basis (Le. normalized net income, revenue, total Adjusted net income assets, other) : Justification: USE THIS BOX TO DOCUMENT AND JUSTIFY WHICH BASIS YOU'VE SELECTED Standard 5% used. 3. Percentage of financialdata source used: 4. Amount selected (planning materiality) Being that Apollo is anew clientand we were notprovided with materiality amounts from the predecessor auditor, we assume that planning materiality is 5% of net income from 2019. 5. Prior year's final materiality 6. Performance materiality/Tolerable misstatement 75% of planning materiality) 0 7. Listing scope (amount threshold for suggested adjustments) (using 5% to 10% of planning materiality based on expected level of adjustments is usually appropriate) 5% 0 Engagement Partner A. Anderson Engagement Quality ControlReviewerApollo Shoes, Inc A-6 Audit Budget Prepared by: DW 31-Dec-20 Reviewed by: AA Auditor Billing Rat Audit Area Projected Hours Actual Hours Extended Cost Darlene Wardlaw 357 Planning 300 $ 107,100 Taylor Crump 225 Internal Control Testing 275 61,875 Senior 298 Cash 150 44,700 Senior 298 Accounts Receivable 180 $ 53,640 Taylor Crump 225 Inventory 150 $ 33,750 Taylor Crump 225 Prepaids 90 20,250 Taylor Crump 225 Property, Plant and Equipment 200 45,000 Taylor Crump 225 Other Assets 90 20,250 Senior 298 Current Liabilities 200 $ 59,600 Senior 298 Notes Payable 150 $ 44,700 Darlene Wardlaw 357 Stockholders' Equity 250 89,250 Senior 298 Revenue 200 59,600 Taylor Crump 225 Expenses 200 45,000 Total $ 684,715.00 Contracted Price $ 750,000.00 Profit $ 65,285.00A-7 Prepared by: DW Reviewed by: |AA Apollo Shoes, Inc. Audit Staffing Memo - A-7 December 31, 2020 Based on the information reviewed in the Apollo Shoes 10-K, minutes of the board of directors, and other documents, I believe that the audit team will require the following specialized expertise: a. Special expertise in Apollo's business and products is probably not necessary. The products are ordinary shoes. The company gave no indication of dealing in complicated transactions such as rubber futures hedging. Auditors with general retail and wholesale experience ought to be able to cope with the expertise demands. b. The audit team will need some special expertise in several areas: (1) the tax personnel probably know how to prepare the state franchise tax return, and that expertise might not be very special, (2) auditors with SEC knowledge and experience will need to participate, and (3) the team will need people with computer expertise on the engagement.Required information A - Planning - Chapter 3 Analyze the Data In this mini-case you will perform some procedures required as a part of audit planning. For ease your audit manager has already organized the workpapers and completed several of the required workpapers. Instructions: Read the email from your manager, then read the steps in the audit program found on Work Paper A-O and familiarize yourself with the other planning section work papers. Complete all the steps on the audit program instructed by your manager. When you are finished with the items on the workpaper enter your initials in the box in the top right marked "Prepared By". This entire completed workbook should be renamed as PLAN2_Firstname_Lastname and upload to D2L. Mini Case Apollo Planning Part 2 Audit Mini Case Additional Files 2019 10-K 2020 Apollo Organization Chart 2020 Apollo Shoes Minutes Rights managed content: Apollo Shoes (text) A - Planning - Part 1 Amount calculated/selected for planning materiality. Minimum MaximumRequired information A - Planning - Chapter 3 Analyze the Data In this mini-case you will perform some procedures required as a part of audit planning. For ease your audit manager has already organized the workpapers and completed several of the required workpapers. Instructions: Read the email from your manager, then read the steps in the audit program found on Work Paper A-0 and familiarize yourself with the other planning section work papers. Complete all the steps on the audit program instructed by your manager. When you are nished with the items on the workpaper enter your initials in the box in the top right marked \"Prepared By". This entire completed workbook should be renamed as PLAN2_Firstname_Lastname and upload to D2L. Mini Case Apollo Planning Part 2 Audit Mini Case Additional Files 2019 10K 2020 Apollo Organization Chart 2020 Apollo Shoes Minutes Rights Ina raged content". Apollo Shae-s [next] A - Planning - Part 2 Amount calculatedi'selected for listing scope. _:| Required information A - Planning - Chapter 3 Analyze the Data In this mini-case you will perform some procedures required as a part of audit planning. For ease your audit manager has already organized the workpapers and completed several ofthe required workpapers. Instructions: Read the email from your manager, then read the steps in the audit program found on Work Paper A0 and familiarize yourself with the other planning section work papers. Complete all the steps on the audit program instructed by your manager. when you are nished with the items on the workpaper enter your initials in the box in the top right marked \"Prepared By". This entire completed workbook should be renamed as PLAN2_Firstname_Lastname and upload to 02L. Mini Case Apollo Planning Part 2 Audit Mini Case Additional Files 2019 10K 2020 Apollo Organization Chart 2020 Apollo Shoes Minutes Rights Ina raged content: Apollo Shoes {Next}