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In this mini-case you will complete the test of details on accounts receivable for the 2016 audit of EarthWear Clothiers, Inc. The principal test of...

Could you please help me with this Earthwear Mini case Chapter 10 (audit).?

In this mini-case you will complete the test of details on accounts receivable for the 2016 audit of EarthWear Clothiers, Inc. The principal test of detail involves sending "confirmations" or letters to customers so that they can confirm that they owe EarthWear the reported balance. All six customer accounts receivable balances exceeding $100,000 were targeted for testing. These six balances, aggregated total of $921,000, were confirmed without exceptions. The remaining accounts are of similar size and total $7,722,000 and will be tested via audit sampling. Inputs for the sample size determination were, Desired Confidence Level–95%, Tolerable Misstatement–$600,000, and Expected Misstatement–$154,440. Based on these inputs, 67 accounts receivable balances were selected for confirmation requests. The first 63 accounts receivable confirmations have already been reviewed by other staff members and no errors have been found. The remaining four confirmations require your review as they were returned with notes from customers indicating a potential misstatement. Please note that legitimate timing differences do not result in misstatements. rev: 09_13_2016_QC_CS-58870, 10_20_2016_QC_CS-66079 1. value: 14.00 points Note: This question will not be automatically graded. It will be sent to your instructor for review. Required information 1 . Review the four confirmation responses in the PDF file downloaded from the mini-case website (a link is also provided below). Enter the information into Work Paper 10-1. For each confirmation response, please determine whether the difference noted by the customer represents a misstatement or a timing difference. After reviewing all four confirmations, please complete both the nonstatistical and the statistical evaluation options outlined on Work Paper 10-1. Chapter 9 of the text provides guidance on both nonstatistical and statistical evaluation. You will need to obtain the Sampling Interval before evaluating the results statistically using IDEA. One approach you can use to obtain the sampling interval is to calculate the sample size in IDEA using the inputs provided above. Please refer to Chapter 9 for a description of how to calculate a sample size and evaluate errors using IDEA. Please be careful as you enter your results from IDEA to the work paper as the items may not be listed in the same order. Download the PDF file above to complete this case. Complete the worksheet below by reviewing the accounts receivable confirmation file contained in the Instructions. (Leave no cell blank - Be sure to enter "0" wherever required.) Work Paper 10-1 EARTHWEAR CLOTHIERS Evaluation of A/R Confirmatio December 31, 2016 Results of A/R Confirmations Customer ID Customer Name A/R Balance A/R Balance per Difference per Customer Re
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per clients' records Customer 652-54310 Red Star Health Group $ 12,365 $ $ 210-38725 Museum of Flight $ 14,235 $ $ 254-62418 Summit Hills Country Club $ 24,362 $ $ 179-26343 Central States Hotels $ 18,642 $ $ 63 additional items $ 880,560 $ 880,560 $ 0 Total Dollar Amount of Items in Sample $ 950,164 $ $ N T Nonstatistical Evaluation of Errors (Round your percentage answers for "Ratio of Misstatements" to 4 decimal places. Round all other answers to the nearest whole dollar. Leave no cell blank - Be sure to enter "0" wherever required.) Stratu m Book Value of Stratum Book Value of Sample Known or Factual Misstate ment Ratio of Misstatem ents in Stratum Tested* Projected Misstatem ent** Evaluation of Test Results >$100, 000 $ 921,0 00 $ 921, 000 $ % $ <$100, 000 $ 7,722 ,000 $ 950, 164 $ % $ Total Projected Misstatement $ Statistical Evaluation of Errors using IDEA Monetary Unit Sampling (Round you answers to 2 decimal places. Leave no cell blank - Be sure to enter "0" wherever required.) Results Overstatements Understatements Sample Size 67 67 Number of errors 4 0 Gross most likely error Net most likely error Total precision 12,356 9 0 14,235 21,520 2842 15,642 3,000 930,078 20,086 Evaluation of test results? Evaluation o
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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, Carol McKay Controller, EarthWear Clothiers CONFIRMATION: The balance receivable from us for $12,365 as of December 31, 2016, is correct except as noted below: CUSTOMER NAME Date By Print Name: Position: Carol McKay David Allen Our accounting records show a balance of $12,356. 1/21/2017 David Allen Accounts Payable Clerk P.O. Box 787 – Boise, Idaho 83845
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EARTHWEAR CLOTHIERS INC - INTEROFFICE MEMORANDUM TO: WILLIS & ADAMS, CPAS FROM: ACCOUNTS RECEIVABLE GROUP SUBJECT: CUSTOMER CONFIRMATION ERROR: 652-54310 DATE: 1/24/2017 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.
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