Accounts Receivable Confirmations You work at the accounting firm of Willis & Adams and have been...

 

 
 
 

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Accounts Receivable Confirmations You work at the accounting firm of Willis & Adams and have been asked to complete the test of details on accounts receivable for the 2014 audit of EarthWear Clothiers, Inc. (the audit client). The primary test involves sending confirmations to customers so that they can confirm the amount that they owe to EarthWear as of December 31, 2014. The remaining three confirmations require your review because they were returned with notes from customers indicating a potential misstatement. You are required to complete the excel workpaper (workpaper 10-1); complete all empty boxes and initial off on the workpaper to indicate to the audit team who completed the work. In the "reason for the difference column", be sure to explain the reason for the difference in appropriate detail. An audit senior/manager reviewing your work should be able to clearly understand what the issue was. The customer statements were sent with the confirmation as a reminder to the customer of the balance owed; this does not mean that the client's records are always correct. For each item confirmed you will also see a memo with documentation from the client to the auditor. Be sure to look at the returned confirmation, customer statements, and the memo's (including the notes on the memo's) in order to complete the A/R testing and determine if there are any misstatements in the client's records at year-end. You are also required to answer the questions below. 1. What specific type of A/R confirmation did the accounting firm use for this audit? 2. Does the A/R account balance at 12/31/2014 need to be increased, decreased, or no change? 3. Would this be a debit, credit, or no change? 1 2 3 4 EARTHWEAR CLOTHIERS Evaluation of A/R Confirmations December 31, 2014 5 Balance per the client's A/R subledger (i.e. the client's record for that individual customer) Balance per customer Difference Reason for Difference Amount of misstatement in client's A/R subledger $ 3 9 0 1 $ $ Net misstatement $ H 10-1 Initial Here 1/30/2015 A/R balance is OS, US, or NE? (for this one item) EarthWear Red Star Health Group 3520 Lone Star DR Dallas TX 75212-6301 Dear Customers: Please examine the accompanying statement carefully and either confirm its correctness or report any differences to our auditors: Willis & Adams P.O. Box 4080 Boise, Idaho 79443-4080 who are auditing our financial statements. Your prompt attention to this request will be appreciated. An envelope is enclosed for your reply. Please do not send your payments to the auditors. Sincerely, Barol McKay Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $12,365 as of December 31, 2014, is correct except as noted below: Our accounting records show a balance of $12356 CUSTOMER NAME Date 1/21/2015 By David Allen Print Name: David Allen Position: Accounts Payable Clerk P.O. Box 787 - Boise, Idaho 83845 EARTHWEAR CLOTHIERS INC INTEROFFICE MEMORANDUM TO: FROM: WILLIS & ADAMS, CPAS ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 652-54310 DATE: 1/24/2015 CC RED STAR HEALTH GROUP Upon review of our documents and in consultation with the customer, we have determined the customer's records were correct. The correct balance is $12,356 as indicated by the customer on the confirmation request. EarthWear Clothiers P.O. Box 787 Boise, Idaho 83845 Phone: (208) 555-0190 Fax: (208) 555-0191 E-mail: accounts@ewclothiers.com Statement Statement & None (Confirmation Reques Date: December 31, 2012 Customer ID: 652-54310 24 B To: Accounts Payable Red Star Health Group 3520 Lone Star Dr. Dalas TX 75212-6301 Invoice # Description Amount Payment Balance Embroidered shirts (qty. 400) $ 12,365.00 $ - $ 12,365.00 Total $ 12,365.00 Date Type 12/23/2012 Embroidered Goods 12-6354903 Reminder. Please indude the evoce number(s) on your check Terms: Balance due in 30 days REMITTANCE Customer Name: Red Star Health Group Customer 10: 652-54310 Statement #: None (Confirmation Reques Date: December 31, 2012 L 2012/4 Amount Due: $12,365.00 Amount Enclosed: Museum of Flight 308 Air St. Dayton OH 45404-1808 Dear Customers: EarthWear Please examine the accompanying statement carefully and either confirm its correctness or report any differences to our auditors: Willis & Adams P.O. Box 4080 Boise, Idaho 79443-4080 who are auditing our financial statements. Your prompt attention to this request will be appreciated. An envelope is enclosed for your reply. Please do not send your payments to the auditors. Sincerely, Basel McKay Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $14,235 as of December 31, 2014, is correct except as noted below: We show no balance due at the end of last year CUSTOMER NAME Date/17/2015 By Alexis Oliver Print Name: Alexis Oliver Position: Gift Shop Store Manager P.O. Box 787 Boise, Idaho 83845 EARTHWEAR CLOTHIERS INC INTEROFFICE MEMORANDUM TO: FROM: WILLIS & ADAMS, CPAS ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 210-38725 DATE: co 1/21/2015 MUSEUM OF FLIGHT The customer's order was shipped FOB shipping point on December 31, 2014. The freight company confirmed their order was delivered January 2, 2015. The balance shown on the confirmation request of $14,235 is correct. W&A Staff Auditor Note: Examined shipping dment and agree with EarthWear assessment. DLJ 1/21/2015 EarthWear Clothiers P.O. Box 787 Boise, Idaho 83845 Statement Statement #: None (Confirmation Request Date: December 31, 2012| Customer ID: 210-38725 Phone: (208) 555-0190 Fax: (208) 555-0191 E-mail: accounts@ewclothiers.com B To: Accounts Payable Museum of Fight 308 Air St Dayton OH 45404-1808 Date Туре 12/31/2012 Invoice # Embroidered Goods 12-7113264 Description Amount Payment Balance Fleece Vests (500) $ 14,235.00 $ $ 14.235.00 Total $ 14,235.00 Reminder: Please include the invoice number(s) on your check Terms: Balance die in 30 days REMITTANCE Customer Name: Museum of Flight Customer ID: 210-38725 Statement #: None (Confirmation Request Date: Amount Due: Amount Enclosed: December 31, 201 $14.235.00 31.2014 Summit Hills Country Club 236 Dudley Road Crestview Hills, KY 41017 Dear Customers: EarthWear Please examine the accompanying statement carefully and either confirm its correctness or report any differences to our auditors: Willis & Adams P.O. Box 4080 Boise, Idaho 79443-4080 who are auditing our financial statements. Your prompt attention to this request will be appreciated. An envelope is enclosed for your reply. Please do not send your payments to the auditors. Sincerely, Barel McKay Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $24,362 as of December 31, 2014, is correct except as noted below: A payment for invoice 12-6156389 was sent on December 30, 2014 Balance due per our records was $21,520 CUSTOMER NAME Date 1/18/2015 By Greg Simon Print Name: Greg Siman Position: Pro Shop Manager P.O. Box 787 - Boise, Idaho 83845 EARTHWEAR CLOTHIERS INC INTEROFFICE MEMORANDUM TO: FROM: WILLIS & ADAMS, CPAS ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 254-65418 DATE: CC: 1/22/2015 SUMMIT HILLS COUNTRY CLUB The payment was received from the customer on January 2, 2015. All balances were outstanding as of the end of 2014. W&A Staff Auditor Note: Traced payment indicated by customer to daily remittance report. Payment DLJ I was received on January 2, 2015. 1/23/2015 EarthWear Clothiers P.O. Box 787 Bobe, Idaho 83845 Statement Statement #: None (Confirmation Reques Date: December 31, 2012 Customer 10: 254-62418 Phone: (208) 555-0190 Fax: (208) 556-0191 E-mail: account@ewclothiers.com Bill To: Pro Shop Summit Hills Country Club 236 Dudley Road Crestview Hills, KY 41017 Date Туре Invoice Description Amount Payment Balance 12/19/2012 12/26/2012 12/27/2012 Embroidered Goods 12-6156389 Embroidered Goods 12-6756231 Embroidered Goods 12-6812246 Club Blazers Female (35) Assorted Dress Shirts (450) Club Blazers Male (36) $ 2,842.00 $ $ 2,842.00 $ 18,635.00 $ $ 2,885.00 $ $ 18,635.00 $ 2,885.00 Total $ 24,362.00 Reminder: Please indide the invoice number(s) on your check Terms: Balance due in 30 days REMITTANCE Customer Name: Summit Hills Country Club Customer ID: Statement: Date: 254-62418 None (Confirmation Request December 31,2 31, 2014 Accounts Receivable Confirmations You work at the accounting firm of Willis & Adams and have been asked to complete the test of details on accounts receivable for the 2014 audit of EarthWear Clothiers, Inc. (the audit client). The primary test involves sending confirmations to customers so that they can confirm the amount that they owe to EarthWear as of December 31, 2014. The remaining three confirmations require your review because they were returned with notes from customers indicating a potential misstatement. You are required to complete the excel workpaper (workpaper 10-1); complete all empty boxes and initial off on the workpaper to indicate to the audit team who completed the work. In the "reason for the difference column", be sure to explain the reason for the difference in appropriate detail. An audit senior/manager reviewing your work should be able to clearly understand what the issue was. The customer statements were sent with the confirmation as a reminder to the customer of the balance owed; this does not mean that the client's records are always correct. For each item confirmed you will also see a memo with documentation from the client to the auditor. Be sure to look at the returned confirmation, customer statements, and the memo's (including the notes on the memo's) in order to complete the A/R testing and determine if there are any misstatements in the client's records at year-end. You are also required to answer the questions below. 1. What specific type of A/R confirmation did the accounting firm use for this audit? 2. Does the A/R account balance at 12/31/2014 need to be increased, decreased, or no change? 3. Would this be a debit, credit, or no change? 1 2 3 4 EARTHWEAR CLOTHIERS Evaluation of A/R Confirmations December 31, 2014 5 Balance per the client's A/R subledger (i.e. the client's record for that individual customer) Balance per customer Difference Reason for Difference Amount of misstatement in client's A/R subledger $ 3 9 0 1 $ $ Net misstatement $ H 10-1 Initial Here 1/30/2015 A/R balance is OS, US, or NE? (for this one item) EarthWear Red Star Health Group 3520 Lone Star DR Dallas TX 75212-6301 Dear Customers: Please examine the accompanying statement carefully and either confirm its correctness or report any differences to our auditors: Willis & Adams P.O. Box 4080 Boise, Idaho 79443-4080 who are auditing our financial statements. Your prompt attention to this request will be appreciated. An envelope is enclosed for your reply. Please do not send your payments to the auditors. Sincerely, Barol McKay Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $12,365 as of December 31, 2014, is correct except as noted below: Our accounting records show a balance of $12356 CUSTOMER NAME Date 1/21/2015 By David Allen Print Name: David Allen Position: Accounts Payable Clerk P.O. Box 787 - Boise, Idaho 83845 EARTHWEAR CLOTHIERS INC INTEROFFICE MEMORANDUM TO: FROM: WILLIS & ADAMS, CPAS ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 652-54310 DATE: 1/24/2015 CC RED STAR HEALTH GROUP Upon review of our documents and in consultation with the customer, we have determined the customer's records were correct. The correct balance is $12,356 as indicated by the customer on the confirmation request. EarthWear Clothiers P.O. Box 787 Boise, Idaho 83845 Phone: (208) 555-0190 Fax: (208) 555-0191 E-mail: accounts@ewclothiers.com Statement Statement & None (Confirmation Reques Date: December 31, 2012 Customer ID: 652-54310 24 B To: Accounts Payable Red Star Health Group 3520 Lone Star Dr. Dalas TX 75212-6301 Invoice # Description Amount Payment Balance Embroidered shirts (qty. 400) $ 12,365.00 $ - $ 12,365.00 Total $ 12,365.00 Date Type 12/23/2012 Embroidered Goods 12-6354903 Reminder. Please indude the evoce number(s) on your check Terms: Balance due in 30 days REMITTANCE Customer Name: Red Star Health Group Customer 10: 652-54310 Statement #: None (Confirmation Reques Date: December 31, 2012 L 2012/4 Amount Due: $12,365.00 Amount Enclosed: Museum of Flight 308 Air St. Dayton OH 45404-1808 Dear Customers: EarthWear Please examine the accompanying statement carefully and either confirm its correctness or report any differences to our auditors: Willis & Adams P.O. Box 4080 Boise, Idaho 79443-4080 who are auditing our financial statements. Your prompt attention to this request will be appreciated. An envelope is enclosed for your reply. Please do not send your payments to the auditors. Sincerely, Basel McKay Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $14,235 as of December 31, 2014, is correct except as noted below: We show no balance due at the end of last year CUSTOMER NAME Date/17/2015 By Alexis Oliver Print Name: Alexis Oliver Position: Gift Shop Store Manager P.O. Box 787 Boise, Idaho 83845 EARTHWEAR CLOTHIERS INC INTEROFFICE MEMORANDUM TO: FROM: WILLIS & ADAMS, CPAS ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 210-38725 DATE: co 1/21/2015 MUSEUM OF FLIGHT The customer's order was shipped FOB shipping point on December 31, 2014. The freight company confirmed their order was delivered January 2, 2015. The balance shown on the confirmation request of $14,235 is correct. W&A Staff Auditor Note: Examined shipping dment and agree with EarthWear assessment. DLJ 1/21/2015 EarthWear Clothiers P.O. Box 787 Boise, Idaho 83845 Statement Statement #: None (Confirmation Request Date: December 31, 2012| Customer ID: 210-38725 Phone: (208) 555-0190 Fax: (208) 555-0191 E-mail: accounts@ewclothiers.com B To: Accounts Payable Museum of Fight 308 Air St Dayton OH 45404-1808 Date Туре 12/31/2012 Invoice # Embroidered Goods 12-7113264 Description Amount Payment Balance Fleece Vests (500) $ 14,235.00 $ $ 14.235.00 Total $ 14,235.00 Reminder: Please include the invoice number(s) on your check Terms: Balance die in 30 days REMITTANCE Customer Name: Museum of Flight Customer ID: 210-38725 Statement #: None (Confirmation Request Date: Amount Due: Amount Enclosed: December 31, 201 $14.235.00 31.2014 Summit Hills Country Club 236 Dudley Road Crestview Hills, KY 41017 Dear Customers: EarthWear Please examine the accompanying statement carefully and either confirm its correctness or report any differences to our auditors: Willis & Adams P.O. Box 4080 Boise, Idaho 79443-4080 who are auditing our financial statements. Your prompt attention to this request will be appreciated. An envelope is enclosed for your reply. Please do not send your payments to the auditors. Sincerely, Barel McKay Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $24,362 as of December 31, 2014, is correct except as noted below: A payment for invoice 12-6156389 was sent on December 30, 2014 Balance due per our records was $21,520 CUSTOMER NAME Date 1/18/2015 By Greg Simon Print Name: Greg Siman Position: Pro Shop Manager P.O. Box 787 - Boise, Idaho 83845 EARTHWEAR CLOTHIERS INC INTEROFFICE MEMORANDUM TO: FROM: WILLIS & ADAMS, CPAS ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 254-65418 DATE: CC: 1/22/2015 SUMMIT HILLS COUNTRY CLUB The payment was received from the customer on January 2, 2015. All balances were outstanding as of the end of 2014. W&A Staff Auditor Note: Traced payment indicated by customer to daily remittance report. Payment DLJ I was received on January 2, 2015. 1/23/2015 EarthWear Clothiers P.O. Box 787 Bobe, Idaho 83845 Statement Statement #: None (Confirmation Reques Date: December 31, 2012 Customer 10: 254-62418 Phone: (208) 555-0190 Fax: (208) 556-0191 E-mail: account@ewclothiers.com Bill To: Pro Shop Summit Hills Country Club 236 Dudley Road Crestview Hills, KY 41017 Date Туре Invoice Description Amount Payment Balance 12/19/2012 12/26/2012 12/27/2012 Embroidered Goods 12-6156389 Embroidered Goods 12-6756231 Embroidered Goods 12-6812246 Club Blazers Female (35) Assorted Dress Shirts (450) Club Blazers Male (36) $ 2,842.00 $ $ 2,842.00 $ 18,635.00 $ $ 2,885.00 $ $ 18,635.00 $ 2,885.00 Total $ 24,362.00 Reminder: Please indide the invoice number(s) on your check Terms: Balance due in 30 days REMITTANCE Customer Name: Summit Hills Country Club Customer ID: Statement: Date: 254-62418 None (Confirmation Request December 31,2 31, 2014