Oceanview Marine Company

Accounts Receivable Leadsheet

December 31, 2018
2018
2017 2018 Net Adjusted
Account Number and Name Balance Balance Adjustments Balance

1100 — Accounts receivable 1,402,229 PY 1,762,682 G/L

1110 — Allowance for doubtful

accounts (116,636) PY (116,636) G/L (31,706) (148,342) 21-15

Total 1,285,593 1,646,046

F F
Tickmark legend

GL Agreed to general ledger.

PY Agreed to prior year working papers.

F Footed with out exception.

% Change
(before
adjustment)

25.71%

0.00%

28.04%
 Oceanview Marine Company 21-2
Adjusting Journal Entries: Accounts Receivable
December 31, 2018

Account Number and Name Debit Credit

6100 — Bad debts expense $ 31,706.00

1110 — Allowance for bad debts X $ 31,706.00

Explanation: To adjust allowance account to estimated balance at year-end. See wp 21-15.

estimated allowance 21-15 $ 148,342
per clients book $ 116,636

X - Posted to leadsheet

21-10
to
40100 sales revenue 21-14 3515

21-10
To
21-2
 Oceanview Marine Company
Planned Tests of Balances Matrix - Accounts Receivable
December 31, 2018

Analytical
Procedures Planned Tests
Substantive Tests
(High, of Balances
Control Risk: of Transactions:
Acceptable Inherent Medium, or Sales Cycle Sales Cycle (Extensive,
Audit Audit Risk Risk (High, Low (High, (High, Medium, or Medium, or
Objectives (High, Medium Medium, or potential for Medium, or Low likelihood of Reduced Tests)
or Low) Low) misstmts.) Low) misstmts.)

Detail tie-in M L L L L R

Existence M M L M L M

Completeness M M L L L M

Accuracy M M M L L

Classification M L L H L

Realizable
value
M M M M L

Cutoff M M M L L

Rights M M M L L

Presentation
and disclosure
M L L L L

Preliminary judgment about materiality: $75,000

Performance materiality for accounts receivable: $40,000

* For each audit objective with extensive or medium planned tests of balances (E or M in column seven), use column eight to
indicate your primary concern(s) about that objective.
 21-6

Comments *

Consideration of
required fraud risk of
improper revenue
recognition .

Incentive for private

company to
understate revenue.

concern for large number of transaction

concern for lack of controls over sales classification accounts based on estimation

accounts payable concerning week controls over credit approval

inherent risk of misstatements and accounts payable concerning

Risk of overstating A/R and revenue

mn seven), use column eight to
H E
M M
L R
 Oceanview Marine Company 21-17
Calculation of Sample Size:
Nonstatistical Sampling
December 31, 2018

Decisions and Facts for Determining Sample Size:

Book Value of the recorded population: 1,762,682.00 (86 accounts)

Book value of individually material accounts: 1,166,116.00 (13 accounts)

(test all material accounts)

Book value of all remaining accounts (BV): 1,166,116.00

(test only a sample)

Tolerable Misstatement (TM): 40,000.00

Confidence Factor (CF): 2.0 (from table below)

n = (sample size accounts < tolerable misstatement): 58 (round to whole number)

Note: n = (BV x CF) / TM

Confidence Factor for Determining Sample Size:

(The confidence factor should be based on considerations of acceptable audit risk, inherent risk, control risk, results of
preliminary analytical procedures, and the results of substantive tests of transactions)

Confidence of
Risk of Incorrect Acceptance Confidence Factor
Sample
37% 63% 1
14% 86% 2
5% 95% 3

Justify/explain your decision:

Inherent risks for the existence and accuracy objectives for accounts receivable were assessed as medium. After
performing tests of transactions for the sales and cash receipts cycle, control risks for the existence and accuracy
objectives for accounts receivable were assessed as medium and low, respectively. Acceptable audit risk is medium.
Results of substantive tests of transactions and analytical procedures were generally favorable. A confidence factor of
2 is considered appropriate considering these factors.

Other factors considered:

Little anticipated misstatement in accounts receivable.

Current file 3 - tests of balances, completing the audit

 Oceanview Marine Company 21-18
Sample Selection: Nonstatistical Sampling
December 31, 2018

Audit Area: Accounts receivable

Individually materal accounts greater than tolerable misstatement of: 40,000

Amount
Customer Name Confirmed

1 Anthony Underwriters 117,990.00

2 Bischoff, John 113,655.00

3 Borst, Robert 155,690.00

4 Devine, Dan 121,456.00

5 Geyer, Robert 68,904.00

6 to 13 Various 588,421.00

Total 1,166,116.00

Sample below tolerable misstatement:

Sampling Interval = Number of Accounts / Sample Size = 2
(round to whole number)

Amount
Customer Name (Random Starting Point: 1st account) Confirmed

1 James Abbott 21,345.00

2 Allen, Robert 348.21

3 Beatty, Lonnie 22,456.00

4 Binkowski, Alex 5,865.00

5 Chappelle, Daniel 13,687.00

6 to 35 Various 292,641.14

Total 356,342.35

Current file 3 - tests of balances, completing the audit

 Oceanview Marine Company 21-19
Evaluation of A/R Confirmations:
Nonstatistical Sampling
December 31, 2018

Customer amounts greater than tolerable misstatement—Summary of Confirmation Differences:

Amount of
A/R Balance A/R Balance Amount Reason(s) Client Misstatement,
Customer per Client's per of for if any
Name Records Customer Difference Difference Over (Under)

Robert Brost 155,690.00 155,690.00 timing difference 0.00

not an expectatiom

John Underwood 46,770.00 45,660.00 1,110.00 incorrect model 1,110.00

number used to
record sale
0.00

0.00

Net misstatement: 1,110.00

Sample items less than tolerable misstatement—Summary of Confirmation Differences: Amount of

A/R Balance A/R Balance Amount Reason(s) Client Misstatement,
Customer per Client's per of for if any
Name Records Customer Difference Difference Over (Under)

Rick Howard 11,678.00 11,561.00 117.00 117.00

clients fail to
issue credit
memo until jan
Diane Meier 21,456.90 19,456.90 2,000.00 2,000.00
pricing error on
floor model

Paul Steinbart 13,654.00 13,249.00 405.00 405.00

client fail to
record equip.
upgrades
0.00

Net misstatement: 2,522.00

Current file 3 - tests of balances, completing the audit

 Oceanview Marine Company 21-20
Evaluation of A/R Confirmations:
Nonstatistical Sampling (continued)
December 31, 2018

Calculation of Projected Misstatement:

Misstatements in individually significant accounts:

Net misstatement = 1,110.00
(misstatements are not projected since tested 100%)

Sample Projected Misstatement:

(net misstatement/$ sample size) x ($ population size*) = 11,538.75

Total projected misstatement = 12,648.75

* The population size for projection is the book value of the accounts less than tolerable misstatement.

Calculation of Actual Allowance for Sampling Risk:

Tolerable misstatement = 40,000.00

Less: Projected misstatement = 12,648.75

Allowance for sampling risk = 27,351.25

Current file 3 - tests of balances, completing the audit

 Oceanview Marine Company 21-21
Evaluation of A/R Confirmations:
Nonstatistical Sampling (continued)
December 31, 2018

Decision (check one):

✘ Accept population as stated.

(No adjustment required for account to be fairly stated.)
Request client to adjust population.
(Account is not fairly stated, but if client corrects misstatements found in sample, account
will be acceptable.)
Expand audit tests.
(Account is not fairly stated, and cannot be made acceptable by correcting misstatements
found in sample.)
Some other action. Specify:

Explain/justify your decision:

Projected misstatement is lower than the tolerable misstatement which justifies that the account is
fairly stated.

Conclusion:
the result show that the account receivables are fairly treated

Calculation of Unadjusted Projected Misstatement:

Projected misstatement = 12,648.75

Less: Any adjusting journal entry (net) = 3,632.00

Unadjusted projected misstatement = -9,016.75

(if greater than the audit misstatement posting threshold,
carry forward to Summary of Uncorrected Misstatements
(workpaper 90-1))

Current file 3 - tests of balances, completing the audit

 Oceanview Marine Company 21-7
Accounts Receivable Listing BC 2/05/2019
December 31, 2018 PBC

Amounts > $40,000

0-30 31-60 61-90 91-120
Customer Name days days days days Total

Anthony Underwriters 0.00 117,990.00 0.00 0.00 117,990.00 S

Bischoff, John 0.00 113,655.00 0.00 0.00 113,655.00 S
Borst, Robert 155,690.00 0.00 0.00 0.00 155,690.00 S
Devine, Dan 121,456.00 0.00 0.00 0.00 121,456.00 S
Geyer, Robert 0.00 68,904.00 0.00 0.00 68,904.00 S
Hayes, Lisa 45,990.00 0.00 0.00 0.00 45,990.00 S
Kelsey, Martin 123,568.00 0.00 0.00 0.00 123,568.00 S
Laubauch, Ken 45,076.00 0.00 0.00 0.00 45,076.00 S
Smith, Linda 47,665.00 0.00 0.00 0.00 47,665.00 S
Southern Construction 0.00 0.00 190,890.00 0.00 190,890.00 S
Swain, Monte 0.00 46,895.00 0.00 0.00 46,895.00 S
Sykora, Larry 0.00 41,567.00 0.00 0.00 41,567.00 S
Underwood, John 0.00 0.00 46,770.00 0.00 46,770.00 S
Total belwo $40,000 539,445.00 389,011.00 237,660.00 0.00 1,166,116.00
F F F F F, CF
Cumulative
Amounts <$40,000 Total
Abbot, James 0.00 21,345.00 0.00 0.00 21,345.00 21,345.00
Adams, Don 0.00 0.00 0.00 259.45 259.45 21,604.45
Allen, Robert 432.00 0.00 0.00 0.00 432.00 22,036.45
Anderson, Matt 235.67 134.76 125.32 0.00 495.75 22,532.20
Bates, Mary 127.86 213.00 0.00 0.00 340.86 S 22,873.06
Beatty, Lonnie 21,390.00 0.00 0.00 0.00 21,390.00 44,263.06
Benson Realty 113.87 0.00 0.00 0.00 113.87 44,376.93
Binkowski, Alex 654.00 238.31 456.71 0.00 1,349.02 45,725.95
Capicchioni, Rita 432.74 246.87 0.00 0.00 679.61 46,405.56
Chappelle, Daniel 0.00 24,678.00 0.00 0.00 24,678.00 71,083.56
Chiang, Alpha 21,345.00 0.00 0.00 0.00 21,345.00 92,428.56
Coscarelli, Stephen 0.00 0.00 0.00 145.56 145.56 92,574.12
DeLuca, Frank 22,458.00 0.00 0.00 0.00 22,458.00 115,032.12
Detzler, Richard 0.00 0.00 0.00 1,145.00 1,145.00 116,177.12
Dugar, Amitabh 245.68 123.65 0.00 0.00 369.33 S 116,546.45
Elder, Robert 476.89 367.90 543.00 0.00 1,387.79 117,934.24
Elliott, David 345.76 247.69 0.00 0.00 593.45 118,527.69
Erlinger, Eric 4,567.00 0.00 0.00 0.00 4,567.00 123,094.69
Escobar, Susan 0.00 11,567.00 0.00 0.00 11,567.00 134,661.69
Finney, Robert 0.00 0.00 0.00 22,154.75 22,154.75 156,816.44
Franklin, James 21,367.00 0.00 0.00 0.00 21,367.00 178,183.44
Totals this page 94,191.47 59,162.18 1,125.03 23,704.76 178,183.44
Oceanview Marine Company 21-8
BC 2/05/2019
Current file 3 - tests of balances, completing the audit
 21-8
Accounts Receivable Listing BC 2/05/2019
December 31, 2018 PBC

0-30 31-60 61-90 91-120 Cumulative

Customer Name days days days days Total Total

Totals from prior page 94,191.47 59,162.18 1,125.03 23,704.76 178,183.44 178,183.44
Gibson, Marion 0.00 8,900.00 0.00 0.00 8,900.00 187,083.44
Groomer, Michael 23,567.00 0.00 0.00 0.00 23,567.00 210,650.44
Hansen, Karen 213.45 324.65 119.11 0.00 657.21 211,307.65
Hill, Leonard 0.00 0.00 0.00 348.21 348.21 S 211,655.86
Howard, Richard 0.00 11,678.00 0.00 0.00 11,678.00 223,333.86
J & S Research 654.97 0.00 0.00 0.00 654.97 223,988.83
Jenkins, Frank 0.00 0.00 0.00 21,680.00 21,680.00 245,668.83
Jennings, Rocky 0.00 31,676.00 0.00 0.00 31,676.00 277,344.83
Jensen, Deborah 25,456.00 0.00 0.00 0.00 25,456.00 302,800.83
Kattelus, Sue 345.00 368.00 239.00 114.65 1,066.65 303,867.48
Kessler, Henry 0.00 0.00 23,645.00 0.00 23,645.00 327,512.48
Klaver, Earl 766.34 654.78 324.65 0.00 1,745.77 329,258.25
Klinger, Max 11,960.00 0.00 0.00 0.00 11,960.00 341,218.25
Kubczak, Antoni 345.67 213.45 11.64 0.00 570.76 S 341,789.01
LaFave, Laura 0.00 0.00 0.00 214.68 214.68 342,003.69
LaLonde, Jennifer 0.00 0.00 0.00 8,965.00 8,965.00 350,968.69
Lantis, William 214.67 356.94 158.90 325.76 1,056.27 352,024.96
Larson, Debra 114.67 219.43 0.00 0.00 334.10 352,359.06
Lee, Yang 116.45 235.89 0.00 0.00 352.34 352,711.40
Little, Donna 432.11 325.67 0.00 0.00 757.78 353,469.18
Marsh, Max 318.27 0.00 0.00 0.00 318.27 353,787.45
Maurer, Stephen 0.00 0.00 0.00 643.34 643.34 354,430.79
McCabe, Terry 21,643.00 0.00 0.00 0.00 21,643.00 376,073.79
McCall, Joseph 5,865.00 0.00 0.00 0.00 5,865.00 S 381,938.79
Mechem, William 0.00 0.00 6,590.00 0.00 6,590.00 388,528.79
Meier, Diane 0.00 21,456.90 0.00 0.00 21,456.90 409,985.69
Melbourne Corp. 235.00 134.68 437.00 0.00 806.68 410,792.37
Murphy, James 0.00 0.00 0.00 1,145.00 1,145.00 411,937.37
Nash, Dean 0.00 0.00 0.00 3,567.90 3,567.90 415,505.27
O'Connell, Daniel 456.90 532.00 219.05 0.00 1,207.95 416,713.22
Olin, Barry 0.00 0.00 21,397.00 0.00 21,397.00 438,110.22
Peiffer, Jerrold 0.00 4,595.00 0.00 0.00 4,595.00 442,705.22

Current file 3 - tests of balances, completing the audit

 Totals this page 186,895.97 140,833.57 54,266.38 60,709.30 442,705.22
Oceanview Marine Company 21-9
Accounts Receivable Listing BC 2/05/2019
December 31, 2018 PBC
0-30 31-60 61-90 91-120 Cumulative
Customer Name days days days days Total Total

Totals from prior page 186,895.97 140,833.57 54,266.38 60,709.30 442,705.22 442,705.22
Peoples, Jacquelyn 18,654.00 0.00 0.00 0.00 18,654.00 461,359.22
Perkins, Terry 22,456.00 0.00 0.00 0.00 22,456.00 S 483,815.22
Ramirez, Ramon 1,124.75 234.79 0.00 0.00 1,359.54 485,174.76
Ramsey, James 0.00 2,145.00 0.00 0.00 2,145.00 487,319.76
Raymer, Lester 0.00 0.00 2,246.47 0.00 2,246.47 489,566.23
Rose, Anna 2,145.67 1,158.49 2,145.78 0.00 5,449.94 495,016.17
Ryan, Bernard 21,456.00 0.00 0.00 0.00 21,456.00 516,472.17
Savalli, Karen 556.24 346.78 0.00 0.00 903.02 517,375.19
Schmidt, Peter 134.65 334.61 0.00 0.00 469.26 517,844.45
Schroeder, Bruce 0.00 867.00 0.00 0.00 867.00 518,711.45
Simmons, Carol 0.00 13,687.00 0.00 0.00 13,687.00 S 532,398.45
Spanos, Jim 5,698.00 0.00 0.00 0.00 5,698.00 538,096.45
Steinbart, Paul 0.00 0.00 0.00 13,654.00 13,654.00 551,750.45
Taylor, Denzil 0.00 11,321.00 0.00 0.00 11,321.00 563,071.45
Trotter, David 21,456.00 0.00 0.00 0.00 21,456.00 584,527.45
Tuttle, Tom 154.65 214.60 124.60 369.40 863.25 585,390.70
Warner, Wendy 356.90 213.92 0.00 0.00 570.82 585,961.52
Wilcox, Laura 6,890.00 0.00 0.00 0.00 6,890.00 592,851.52
Young, Gregory 0.00 0.00 0.00 1,124.00 1,124.00 593,975.52
Zelli, Arthur 0.00 2,590.48 0.00 0.00 2,590.48 596,566.00
TOTAL < $40,000 287,978.83 173,947.24 58,783.23 75,856.70 596,566.00
F F F F F, CF
TOTAL > $40,000 539,445.00 389,011.00 237,660.00 0.00 1,166,116.00
TOTAL ACCTS RECEIVABLE 827,423.83 562,958.24 296,443.23 75,856.70 1,762,682.00 G/L
F F F F F, CF
21-15 21-15 21-15 21-15

Tickmark Legend

F = Footed without exception.

CF = Cross-footed without exception.

G/L =Agreed to general ledger without exception.

S = Agreed to A/R subsidiary records without exception. Selected all over $40,000.
For amounts below $40,000, began with 5th account; selected every 10th account thereafter.

Current file 3 - tests of balances, completing the audit

 21-7
BC 2/05/2019

Current file 3 - tests of balances, completing the audit