audit report

You have completed your degree, successfully passed your CPA exam, gained the necessary experience and obtained your CPA license. Congrats! After gaining management experience and careful contemplation, you have decided to start your own CPA firm which you have named (your last name] & Associates, CPAs located here in Saginaw. [Your last name] & Associates, CPAs were hired to complete an integrated audit of Point, LLC. for their fiscal year ended December 31st, 2020. 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 2019. During the audit, the following is noted but you do not see it reflected in Point's financial statements, footnotes and / or disclosures: Point's new CFO 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 $5,140 and $3,270 in fees for 2016 & 2017 respectively, amounts are considered immaterial) while working for the audit firm prior to accepting his new position in early 2020 Point has purchased a number of smaller acquisitions over the last eight years resulting in Goodwill being recorded on the books. In 2019, Point 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. Point disagrees as customers are still able to get to their websites based on these legacy brand searches. Total goodwill associated with eliminated brands $987 million. During 2020, Point 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 Point locations use double-declining depreciation. Based on consultation with tax and fixed asset management, the decision to change depreciation method 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 locations. Point factored $455,000 of Accounts Receivable and continues to include them within their balance sheet. This amount is considered material for Point Point currently recognizes all revenue associated with product sale at time of shipment regardless of customer shipping terms. Point's average monthly sales was $1,012,500 for 2020 and $987.000 for 2019. Sales were relatively flat period to period particularly in the fourth quarter. You obtained the following breakdown regarding customer sales and shipping terms: 2019: 89.05% FOB Shipping Point: 3.2% FOB Shipping Point, Seller pays freight and remaining 7.75% FOB Destination 2020: 87.75% FOB Shipping Point: 3.5% FOB Shipping Point Seller pays freight and remaining 8.75% FOB Destination 1. Using all the information provided, Prepare your company's formal Audit Report addressed to Point's BoD, dated April 18th, 2021, to accompany the 2020-2019 comparative financial statements. 2. After the end of the Audit Report (NOTE: insert so on next page in Word doc), for each of the items above, LIST each item by giving a brief description and Explain (no more than one / two sentences) either . why item was included in Audit Report OR . why the item was not / did not need to be included in Audit Report You have completed your degree, successfully passed your CPA exam, gained the necessary experience and obtained your CPA license. Congrats! After gaining management experience and careful contemplation, you have decided to start your own CPA firm which you have named (your last name] & Associates, CPAs located here in Saginaw. [Your last name] & Associates, CPAs were hired to complete an integrated audit of Point, LLC. for their fiscal year ended December 31st, 2020. 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 2019. During the audit, the following is noted but you do not see it reflected in Point's financial statements, footnotes and / or disclosures: Point's new CFO 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 $5,140 and $3,270 in fees for 2016 & 2017 respectively, amounts are considered immaterial) while working for the audit firm prior to accepting his new position in early 2020 Point has purchased a number of smaller acquisitions over the last eight years resulting in Goodwill being recorded on the books. In 2019, Point 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. Point disagrees as customers are still able to get to their websites based on these legacy brand searches. Total goodwill associated with eliminated brands $987 million. During 2020, Point 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 Point locations use double-declining depreciation. Based on consultation with tax and fixed asset management, the decision to change depreciation method 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 locations. Point factored $455,000 of Accounts Receivable and continues to include them within their balance sheet. This amount is considered material for Point Point currently recognizes all revenue associated with product sale at time of shipment regardless of customer shipping terms. Point's average monthly sales was $1,012,500 for 2020 and $987.000 for 2019. Sales were relatively flat period to period particularly in the fourth quarter. You obtained the following breakdown regarding customer sales and shipping terms: 2019: 89.05% FOB Shipping Point: 3.2% FOB Shipping Point, Seller pays freight and remaining 7.75% FOB Destination 2020: 87.75% FOB Shipping Point: 3.5% FOB Shipping Point Seller pays freight and remaining 8.75% FOB Destination 1. Using all the information provided, Prepare your company's formal Audit Report addressed to Point's BoD, dated April 18th, 2021, to accompany the 2020-2019 comparative financial statements. 2. After the end of the Audit Report (NOTE: insert so on next page in Word doc), for each of the items above, LIST each item by giving a brief description and Explain (no more than one / two sentences) either . why item was included in Audit Report OR . why the item was not / did not need to be included in Audit Report