ACCT 305Apollo Shoes 7e Solution_Wrap-UpTeaching Notes
ACCT 305Apollo Shoes 7e Solution_Wrap-Up
Teaching Notes
The wrap up session has several different areas that will bring the Apollo Shoes audit to a close. Thes
...
ACCT 305Apollo Shoes 7e Solution_Wrap-UpTeaching Notes
ACCT 305Apollo Shoes 7e Solution_Wrap-Up
Teaching Notes
The wrap up session has several different areas that will bring the Apollo Shoes audit to a close. These areas are very important and you want to make sure as you complete the audit process for this case that these areas don’t get slighted.
These areas can be very interesting to the students as they move away from standard auditing steps of cash, inventory and accounts receivable. For example, the ability to use analytical procedures to examine the remaining expense accounts is a valuable audit tool.
The audit plan for stockholder’s equity and final general audit procedures are included here.
Stockholder’s Equity:
Task: Apollo Page
• Review Board of Director minutes for any changes. 139
Subsequent Events:
Task: Apollo Page
• Prepare a memo on the subsequent events noted in the last Board of Director’s minutes and how to address them. 138
Management Representation Letter:
Task: Apollo Page
• Draft a proposed management representation letter. 141
• Draft the management certification statement required by Sarbanes-Oxley. 141
Adjusting Entries
Task: Apollo Page
• Prepare a “scoresheet” working paper listing the proposed adjusting journal entries. 142
Analysis of Estimates:
Task: Apollo Page
• Prepare a memo explaining any bias in management’s estimates. 143
Financial Statements:
Task: Apollo Page
• Draft the financial statements. 144
• Draft the Notes to the financial statements 144
• Draft a management letter. 144
• Draft the audit report. 145
Points to Remember:
Revenues:
• Our testing of revenues is limited due to the nature of the Apollo simulation. We will assume through the testing of accounts receivable (including confirmation of 2017 sales), our review of revenue internal controls, and overall analytic procedures, that revenues are fairly stated (except for the Mall-Warts sale).
• At the end, Apollo will not post the sales and accounts receivable adjustments we recommend from Mall-Warts filing bankruptcy. Note that this comes after we have completed the audit, so several of our estimates and workpapers will have the Mall-Wart sale and accounts receivable proposed adjustments included. Students will not be asked to go back and change the workpapers, estimates, etc.
Expenses:
• As noted above income taxes are based on reversing the Mall-Wart sale.
Audit Report:
• The audit report assumes that the $14 million over-90 day balance was not reserved for, and the $5.8 million Mall Wart sale was recorded, since client management believes the $5.8 million sale and the entire Mal-Wart $20.5 million 12/31/2017 accounts receivable amounts are valid and collectible. The final financial statements assume the same.
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