You are an audit assistant with a public accounting firm in Mayfield, Ontario. You have been...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are an audit assistant with a public accounting firm in Mayfield, Ontario. You have been assigned to audit the Accounts Receivable (AR) for Mayfield Residential Hotel (MRH), a hotel located in your town. MRH offers accommodation on a nightly basis or for long-term stays. Recently, due to the COVID-19 crisis, many health care workers have been transferred temporarily from other cities and have been accommodated by their employer companies in the MRH. MRH has credit arrangement with a number of different companies for accommodating employees on temporary transfers to Mayfield. The aged AR listing for MRH as of December 31, 2020 is attached (see below). During the planning meeting, the audit manager for this audit informed the team that performance materiality is $10,000 and overall materiality is $15,000. The controls over AR were assessed to be high control risk in the previous year's audit and since there were no changes this year the audit manager plans to use that assessment again this year. No misstatements were found in the audit of AR last year. The audit manager has asked you to review the aged AR listing and select a sample of customer balances to confirm that will cover approximately 25% of the total balance. Mayfield Residential Hotel Inc Accounts Receivable Aging List As at December 31, 2020 CUSTOMER NAME Alberta Inc. Bo Co. Limited Dị & Co. Ltd. Dimas Inc. Fang Limited Gauva Inc. Gavinelle Ltd. Imajimo Inc. loulian Ltd. Jae Kyo Corp. Jonat Inc. Kareng Inc. Kavitav Limited Kelvia LLP Lilune Inc. Lindsay's Limited Marwa Inc. Stephenson & Co. Sucherro Corp Michaels & Michaels Ming Inc. Nathar Ltd. Orlando Corp. Prana LLP Rajiv Inc. Renee Limited Uyen Inc. Sydney Corp. Zoumatra Inc. CUSTOMER NUMBER 38322 38326 38329 38330 38331 38332 38333 38334 38335 38338 38348 38350 38359 38360 38361 38364 38366 38367 38369 38374 38376 38381 38385 38391 38392 38393 38396 38397 38398 TOTAL RECEIVABLE 2194.99 2636.64 657.05 1148.47 1537.27 576.55 1690.19 1221.37 1516.98 1090.89 2105.28 316.75 1866.90 2804.27 4027.27 1384.00 978.94 2123.90 1601.95 1333.62 0.00 0.00 4698.62 2938.42 6243.36 2143.30 445.36 1104.37 0.00 50386.71 CURRENT 0-30DAYS 31-60DAYS 1695.02 2074.05 554.07 1387.42 243.21 1391.86 323.81 423.42 579.60 668.95 166.08 872.29 1834.07 4027.27 331.23 1334.95 1601.95 192.24 2613.87 314.88 5977.93 720.06 288.77 29617.00 211.27 562.59 102.98 149.85 203.49 94.24 783.56 445.55 140.22 304.76 364.99 788.95 353.59 1914.95 75.05 265.43 634.46 445.36 178.60 8019.89 61-90DAYS 91-120DAYS 120+DAYS 122.17 166.53 129.85 204.09 897.56 310.00 665.44 94.24 786.67 169.80 344.59 3602 24 511.29 150.67 94.24 788.95 637.00 2348.68 1148.47 990.78 854.39 1384.00 94.24 1.12 1414.95 788.78 6676.73 Required: a) Select a sample (using judgmental sampling) of customer balances for confirmation from the aged December 31 2020 AR listing. Explain the reasons you have for selecting these items. b) Assume the total sample you selected was $13,500 and the confirmations result in a total misstatement of $4,400 (an overstatement). i) What is the best estimate of the total misstatement in accounts receivable? (show your calculation) ii) What action would you take based on your results in i) and why? You are an audit assistant with a public accounting firm in Mayfield, Ontario. You have been assigned to audit the Accounts Receivable (AR) for Mayfield Residential Hotel (MRH), a hotel located in your town. MRH offers accommodation on a nightly basis or for long-term stays. Recently, due to the COVID-19 crisis, many health care workers have been transferred temporarily from other cities and have been accommodated by their employer companies in the MRH. MRH has credit arrangement with a number of different companies for accommodating employees on temporary transfers to Mayfield. The aged AR listing for MRH as of December 31, 2020 is attached (see below). During the planning meeting, the audit manager for this audit informed the team that performance materiality is $10,000 and overall materiality is $15,000. The controls over AR were assessed to be high control risk in the previous year's audit and since there were no changes this year the audit manager plans to use that assessment again this year. No misstatements were found in the audit of AR last year. The audit manager has asked you to review the aged AR listing and select a sample of customer balances to confirm that will cover approximately 25% of the total balance. Mayfield Residential Hotel Inc Accounts Receivable Aging List As at December 31, 2020 CUSTOMER NAME Alberta Inc. Bo Co. Limited Dị & Co. Ltd. Dimas Inc. Fang Limited Gauva Inc. Gavinelle Ltd. Imajimo Inc. loulian Ltd. Jae Kyo Corp. Jonat Inc. Kareng Inc. Kavitav Limited Kelvia LLP Lilune Inc. Lindsay's Limited Marwa Inc. Stephenson & Co. Sucherro Corp Michaels & Michaels Ming Inc. Nathar Ltd. Orlando Corp. Prana LLP Rajiv Inc. Renee Limited Uyen Inc. Sydney Corp. Zoumatra Inc. CUSTOMER NUMBER 38322 38326 38329 38330 38331 38332 38333 38334 38335 38338 38348 38350 38359 38360 38361 38364 38366 38367 38369 38374 38376 38381 38385 38391 38392 38393 38396 38397 38398 TOTAL RECEIVABLE 2194.99 2636.64 657.05 1148.47 1537.27 576.55 1690.19 1221.37 1516.98 1090.89 2105.28 316.75 1866.90 2804.27 4027.27 1384.00 978.94 2123.90 1601.95 1333.62 0.00 0.00 4698.62 2938.42 6243.36 2143.30 445.36 1104.37 0.00 50386.71 CURRENT 0-30DAYS 31-60DAYS 1695.02 2074.05 554.07 1387.42 243.21 1391.86 323.81 423.42 579.60 668.95 166.08 872.29 1834.07 4027.27 331.23 1334.95 1601.95 192.24 2613.87 314.88 5977.93 720.06 288.77 29617.00 211.27 562.59 102.98 149.85 203.49 94.24 783.56 445.55 140.22 304.76 364.99 788.95 353.59 1914.95 75.05 265.43 634.46 445.36 178.60 8019.89 61-90DAYS 91-120DAYS 120+DAYS 122.17 166.53 129.85 204.09 897.56 310.00 665.44 94.24 786.67 169.80 344.59 3602 24 511.29 150.67 94.24 788.95 637.00 2348.68 1148.47 990.78 854.39 1384.00 94.24 1.12 1414.95 788.78 6676.73 Required: a) Select a sample (using judgmental sampling) of customer balances for confirmation from the aged December 31 2020 AR listing. Explain the reasons you have for selecting these items. b) Assume the total sample you selected was $13,500 and the confirmations result in a total misstatement of $4,400 (an overstatement). i) What is the best estimate of the total misstatement in accounts receivable? (show your calculation) ii) What action would you take based on your results in i) and why?
Expert Answer:
Answer rating: 100% (QA)
Sol a Sol b i ii For selecting the Samples of the trade receivables the customers with the long time ... View the full answer
Related Book For
Auditing An International Approach
ISBN: 978-0071051415
6th edition
Authors: Wally J. Smieliauskas, Kathryn Bewley
Posted Date:
Students also viewed these accounting questions
-
You have been assigned to the audit of the financial statements of Office Moving and Storage Limited (OMS) for its year ending December 31, 20X2. The company started 10 years ago and is in the...
-
You have joined a public accounting firm as a junior auditor and have been assigned to the audit team for one of your firms largest audit engagements, Cold Beverages Corp. (CB), a large public...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
(1.71, 2.05) Use the confidence interval to find the margin of error and the sample mean.
-
Price Technologies, a California-based high-tech manufacturer, is considering outsourcing some of its electronics production. Four firms have responded to its request for bids, and CEO Willard Price...
-
Redo exercise 37 using a logit model. Consider an individual with an income of $60,000. What is the probability that she has insurance coverage if her employer contributes 50% of the premium? What if...
-
Sonic Drive-Ins borrowed money by issuing \(\$ 1,000,000\) of \(6 \%\) bonds payable at 96.5 . 1. How much cash did Sonic receive when it issued the bonds payable? 2. How much must Sonic pay back at...
-
There are two players. Each player has to write down a real number greater than or equal to 1; thus the strategy sets are S S = [1,00). Payoffs are as follows (x is the number written by Player 1 and...
-
ABC Corporation manufactures two models, Standard and Premium. June's demand is estimated to be 96 units of the Standard Model and 48 units of the Premium Model. The following per unit data apply:...
-
Find point estimates for the mean and standard deviation of the Months Customer data in the Credit Risk Data file. Draw five random samples of sizes 50 and 250 from the data using the Sampling tool....
-
1. Read the information presented on the two pages linked below 2. Make a journal entry comparing and contrasting the two recessions include: short summaries of each recession ways that the two...
-
Case Study: Managing a branch closure program: an exercise in planning and managing the process of change The aim of this activity is to explore the issues and choices involved in developing an...
-
Solve for x. 6+log (-2x)=7 = 0 x =
-
The table below details the term structure of interest rates as at 01 January 2020: A. Using the information above, describe the shape of the spot yield curve using the terminology covered in this...
-
1. What are the strengths and weaknesses of Canadian cultural diversity? Analyze them in your own words. 2. Do you find any cultural diversity in your own country? Explain the nature of that cultural...
-
How have social practices been shaped by issues and events in wellness in modern culture?
-
All workers have the right to know about the hazards they work around. This includes answers to such questions as: (Select all that aply) What is the time of my safety margin? Where do I go to be...
-
Banner Company acquires an 80% interest in Roller Company for $640,000 cash on January 1, 2013. The NCI has a fair value of $160,000. Any excess of cost over book value is attributed to goodwill. To...
-
Explain the difference between negative assurance and an adverse opinion.
-
Case Description The case involves overpayment of wages to employees making false claims for hours worked. A temporary personnel agency assigned Nurse Jane to work at Municipal Hospital. The...
-
Why is there a cost-benefit trade-off involved in evaluating internal controls for planning the audit?
-
Prove that van der Waals constants \((a, b)\) can be expressed in terms of critical temperature and pressure as follows: a = 27 R 2 T 2 c 64 P c b = R T c 8 P c a = 27 R 2 T c 2 64 P c b = R T c 8 P c
-
Justify the following statement with illustration: 'Violation of Kelvin-Planck statement leads to the violation of Clausius statement'.
-
Show that where \[ \left(\frac{\partial U}{\partial V} ight)_{T}=\frac{T \beta}{\kappa}-P \] \(\beta=\) Coefficient of volume expansion \(\kappa=\) Isothermal compressibility.
Study smarter with the SolutionInn App