In this mini-case, you will complete the test of details on accounts receivable for the 2019 audit of EarthWear Clothiers, Inc. The principal test of detail involves sending "confirmations" or letters to customers so that they can confirm that they owe EarthWear the reported balance. All six customer accounts receivable balances exceeding $100,000 were targeted for testing. These six balances, aggregated total of $921,000, were confirmed without exceptions. The remaining accounts are of similar size and total $7,722,000 and will be tested via audit sampling. Inputs for the sample size determination were, Desired Confidence Level--95%, Tolerable Misstatement--$600,000, and Expected Misstatement--$154,440. Based on these inputs, 67 accounts receivable balances were selected for confirmation requests. The first 63 accounts receivable confirmations have already been reviewed by other staff members and no errors have been found. The remaining four confirmations require your review as they were returned with notes from customers indicating a potential misstatement. Please note that legitimate timing differences do not result in misstatements.

 
 

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EARTHWEAR CLOTHIERS Evaluation of A/R Confirmations December 31, 2019 Results of A/R Confirmations A/R Balance A/R Balance per per clients records Reason (s) for Difference (i.e., timing difference, transposition error, cut-off error, mistake, etc.) Difference per Customer ID Customer Name Customer Customer 652-54310 Red Star Health Group 12,365 $ 12365 $ transpose error 9. timing 210-38725 Museum of Flight 14,235 $ 24 14235 cut off error 254-62418 Summit Hills Country Club $ 24,362 $ 21520 $ 2842 just a mistake 179-26343 Central States Hotels $ 18,642 $ 15642 3000 63 additional items $ 880,560 $ 880,560 $ 0 20086 Total Dollar Amount of Items in Sample $ 950,164 $ 930078 24 Net misstatement Total Dollar Amount of Items in Sampling Populatior Nonstatistical Evaluation of Errors (Round your percentage answers for "Ratio of Misstatements" to 4 decimal places. Round all other answers to the nearest whole dollar. Leave no cell blank - Be sure to enter "O" wherever required.) Ratio of Known or Book Value Book Value Misstatements Projected Stratum Factual Evaluation of Test Results of Stratum of Sample Misstatement in Stratum Misstatement** Tested* $921,000 $950,164 >$100,000 $ 921,000 $ 이용 <$100,000 $7,722,000 The error is far less than the tolerable. Total Projected $ Misstatement EARTHWEAR CLOTHIERS Evaluation of A/R Confirmations December 31, 2019 Results of A/R Confirmations A/R Balance A/R Balance per per clients records Reason (s) for Difference (i.e., timing difference, transposition error, cut-off error, mistake, etc.) Difference per Customer ID Customer Name Customer Customer 652-54310 Red Star Health Group 12,365 $ 12365 $ transpose error 9. timing 210-38725 Museum of Flight 14,235 $ 24 14235 cut off error 254-62418 Summit Hills Country Club $ 24,362 $ 21520 $ 2842 just a mistake 179-26343 Central States Hotels $ 18,642 $ 15642 3000 63 additional items $ 880,560 $ 880,560 $ 0 20086 Total Dollar Amount of Items in Sample $ 950,164 $ 930078 24 Net misstatement Total Dollar Amount of Items in Sampling Populatior Nonstatistical Evaluation of Errors (Round your percentage answers for "Ratio of Misstatements" to 4 decimal places. Round all other answers to the nearest whole dollar. Leave no cell blank - Be sure to enter "O" wherever required.) Ratio of Known or Book Value Book Value Misstatements Projected Stratum Factual Evaluation of Test Results of Stratum of Sample Misstatement in Stratum Misstatement** Tested* $921,000 $950,164 >$100,000 $ 921,000 $ 이용 <$100,000 $7,722,000 The error is far less than the tolerable. Total Projected $ Misstatement

Answer rating: 100% (QA)

Customer ID Customer Name AR balance per ... View the full answer