APOLLO SHOES, INC.An Audit Case to Accompany AUDITING AND ASSURANCE SERVICES Prepared by Timothy J. Louwers M. Loretta Manktelow James Madison University J. Kenneth Reynolds Indiana University McGraw-Hill/Irwin Apollo Shoes, Inc. © The McGraw-Hill Companies, Inc., 2013 1 Acknowledgements We would like to gratefully acknowledge the following individuals for their assistance in preparing and completing this case. Sincere appreciation is due to Marcia Croteau, Reagan McDougall, Meghan Peters, Denise Patterson, Bob Ramsay, Mike Shaub, and several classes of Louisiana State University and James Madison University students. Their suggestions greatly enhanced several portions of the case. However, we remain responsible for all errors of commission and omission. McGraw-Hill/Irwin 2 © The McGraw-Hill Companies, Inc., 2013 Apollo Shoes, Inc. Introduction Apollo Shoes, Inc. is an audit case designed to introduce you to the entire audit process, from planning the engagement to drafting the final report. You are asked to assume the role of a veteran of two-to-three “busy” seasons, “in-charging” for the first time. While Apollo Shoes’ growth has been phenomenal (there has been a dramatic growth in unaudited net income over the past year), there are some concerns: the client doesn’t want your firm (Anderson, Olds, and Watershed (AOW)) to talk with the predecessor auditor, a labor strike is looming, and one of Apollo Shoes’ largest customers is suffering some financial difficulties. Because of busy season, there is little help, other than from an untrained intern. While the intern can do “grunt work,” such as vouching and gathering information for you, he appears incapable of preparing workpapers, making adjusting entries, or even getting good coffee and doughnuts. Assistance does come in the form of an objective, competent internal audit staff. Communication between client personnel and other firm members takes the form of e-mail messages from the engagement partner (Arnold Anderson), the engagement manager (Darlene Wardlaw), the intern (Bradley Crumpler), and the director of Apollo’s internal audit department (Karina Ramirez). Required assignments and memos are in bold print. Page indexing suggestions are given, but feel free to adjust page numbering as you see fit. The AOW intranet website (http://www.mhhe.com/louwers4e/) has many useful resources such as a repository of electronic documents (so that you won’t need to input data or retype documents) and an archive of e-mail messages and their attachments, all filed by account group. While we tried to make the case as realistic as possible, limitations remain. Since you are unable to follow up directly with client personnel, you may need to rely on some evidence with which you may be uncomfortable. In an actual audit, you would be able to inquire, observe, and otherwise follow-up on any questions that you have until you feel comfortable relying on the evidence. To make sure that the case can be completed in a reasonable amount of time, we cut some corners with respect to audit sampling. Understand that audit sampling plays a large role in actual audit practice. The information is sequential in nature. In other words, pay close attention to information disclosed early in the audit (for example, in the Board of Director’s minutes) as it may play a role in subsequent audit work. Similarly, the bank cutoff statement in the cash workpapers and invoices used for valuing inventory may be useful later in the search for unrecorded liabilities and the bank confirmation contains information about long-term liabilities. Lastly, while it is difficult for us to believe that not everyone enjoys auditing as much as we do, we have tried to make the case both interesting and enjoyable (in a perverse sort of way). You can think of the project as a puzzle, in which you have to fill in all the pieces. Alternatively, you could look at the project as a murder mystery that needs a solution. In either case, have fun! Tim Louwers Harrisonburg, VA McGraw-Hill/Irwin Apollo Shoes, Inc. Loretta Manktelow Harrisonburg, VA J. Kenneth Reynolds Bloomington, IN © The McGraw-Hill Companies, Inc., 2013 3 ......................................................... Inc................................................................................................................................................................................................... ...........3 Internal Control Evaluation .....................................117 Substantive Testing: Payroll..............................................2 Planning..........................................113 Substantive Testing: Liabilities...................................... Inc........Table of Contents Introduction.....................62 Substantive Testing: Accounts Receivable................................................................1 Table of Contents.....130 McGraw-Hill/Irwin 4 © The McGraw-Hill Companies......................................................................................................................................................................................................83 Substantive Testing: Prepaids and Other Assets...........................................................................................................................................................................................................................................................................72 Substantive Testing: Inventory .................................107 Substantive Testing: Fixed Assets................................ 2013 Apollo Shoes.................................49 Substantive Testing: Cash......................................................................................................................123 Audit Wrap-up................................................................................................................................................................................................................ 2013 5 . Inc. Inc..McGraw-Hill/Irwin Apollo Shoes. © The McGraw-Hill Companies. and five straight weeks beginning the last week in December for engagement planning.g. As engagement manager. 3. so my interaction time with you will be limited. but we have you tentatively scheduled for one week in October (next week) for bringing you up to speed on Apollo and its industry. Inc. that I am managing four other busy season engagements. DW McGraw-Hill/Irwin 6 © The McGraw-Hill Companies. for General and Administrative. I have heard many good things about you.) you need to complete the audit and I’ll see if I can get them assigned to the audit team. 2013 Apollo Shoes. For now. first let me congratulate you on your recent promotion. to send you a copy of last year’s (2010) 10-K filing with the SEC. I understand that this is your first engagement to in-charge. Lancaster.. Arnold Anderson (aka “Uncle Arnie”) will be the engagement partner. you might want to check one of your old auditing textbooks for an example. and substantive testing.. internal control evaluation. IT specialist. I look forward to working with you on the new Apollo Shoes engagement. I’ll try to help out as much as I can. however. what kind of expertise do you want on your audit team? Just write a brief (onepage) audit staffing memo (GA-2) telling me what expertise (e. page 1) addressed to Mr. Audit Committee Meeting: I have attached the minutes of an audit committee meeting that occurred last week. SEC Filing: I have asked Larry Lancaster. Inc. Finally. Although we have not worked on an engagement together before. Understand. (Since this is our first year on the engagement. Audit Team: Based upon the information that you glean from 1 and 2 above. . President and chairman of the Apollo Shoes board of directors. Please review the minutes of the meeting and draft an appropriate engagement letter (label it GA-1. I’d rather give you too much than too little until we get used to working together. since most of our interaction will be by e-mail. Review the information when you receive it. Scheduling: We are going to have to work around your other engagements. please forgive me if I give you too much detail.Date: 21 OCT 2011 00:42:35 +0000 From: "Darlene Wardlaw" <
[email protected]>> Well.cpa> Subject: Upcoming Apollo Shoes Engagement Attachment: <<AudComMins—101807. do you see any need for special business knowledge in regard to the basic type of business and products Apollo manages? Do you see any need for special audit or accounting expertise for any of the work that we have agreed to perform? In other words. 4. he is pretty sharp so you’ll have to stay on your toes. etc. 2. tax specialist. Since we haven’t worked together before. as it is one of the most important sources of information about a company. I want you familiarize yourself with Apollo Shoes and help me out by doing the following: 1. since you’ll be in the trenches.) I’ll review the letter before getting Arnold to sign it. Unum (VP finance): Well. is $750. Mr. Ms. but we always want to be vigilant. Anderson (partner on the audit): Yes. Apollo was able to save on audit fees when my staff prepared a stack of schedules and analyses that our previous auditors needed.Minutes of the Audit Committee. Smith & Smith. CPAs. Ms. other than normal human error types of mistakes. Karina.. Inc. CPA (partner in charge of the audit). Samuel Carboy (Apollo ’s controller). we are always looking for high quality clients. Ramirez (internal auditor): Darlene. We plan the work to look for major errors and frauds in the accounts. In order to perform the tax work. we’d rather you didn’t. Inc. Wardlaw (manager on the audit): Our tax staffperson can do the state and federal returns. we have never had any unpleasant discoveries of embezzlement or theft. Arnold. Ms. but my estimate. Darlene Wardlaw. Wardlaw (manager on the audit): Yes. CPA (engagement manager). Darlene will let you know immediately if problems arise to cause the work to be more extensive. Anderson (partner on the audit): Well. Costain (treasurer): In the past. Mr. we want to add some work to the audit. and Watershed. While I am new to Apollo. Carboy (controller): Speaking of being ready. Anderson (partner on the audit): No. The three members of the audit committee of the board and the corporate secretary also were present. and she will be assisted by several of our best staff. By the way. 2013 7 . none of the projects that I have undertaken this year shows anything amiss. Eric Unum (Apollo ’s vice president of finance). We look forward to your getting started next month. Unum (VP finance): Thank you.” After our old auditors. Unum (VP finance): Yes. I will give you a list of schedules for various accounts. Mr. CPAs to what we call the “Apollo Shoes Experience. unexpectedly withdrew from the engagement. we would like to contact them. considering the additional work. Mr. why did your previous auditors resign? Mr. I will appreciate your having them ready when we start fieldwork in mid January. Costain (treasurer): This year. Anderson (partner on the audit): I assume you also want us to review the 10-K filing material? Mr. We need to keep up to date on your computer systems. Back to your previous auditors. Anderson (partner on the audit): It is difficult to give you a fixed fee deal. Mr. Meeting ended 5:30 P. with your permission. Apollo Shoes October 18. will Darlene be in charge? Mr. Olds. not really. Ramirez (internal auditor): Last year. Will you plan enough in-depth auditing to give us assurances about errors and frauds in the accounts? Ms. but they did not enter into the conversation. Mr. Will you need any staff help from us? Ms. Wardlaw (manager on the audit): We will follow audit standards and base our audit work on samples of transactions. we were very happy to have a firm of your quality to come aboard. 2011 Present at Meeting: Arnold Anderson. This has been a productive meeting of the minds. I am short on staff time and need to have you prepare the state franchise tax return as well as the federal tax returns. I want to welcome the auditing firm of Anderson.000. McGraw-Hill/Irwin Apollo Shoes. but cleverly hidden schemes might not be discovered. There may be some litigation since they withdrew from the engagement with so little notice. and Karina Ramirez (Apollo ’s director of internal audit). it’s hard to uncover clever schemes. Ms. Unum (VP finance): Well. Sarbanes-Oxley requires that we get prior approval from the audit committee to perform both the tax work as well as the audit. we will be able to give you a trial balance the day after December 31. Is it necessary for you to speak with them to accept the engagement? Mr.M. but it does raise some concerns for our firm. our tax partner. Mr. Unum (VP finance): I’d rather not talk about it. and I will have them reviewed by Maria Olds. /s/ Jeff Chesnut. Unum (VP finance): How much is this going to cost us? Mr. I agree. including a tax specialist and an information systems auditor. Mr. Secretary © The McGraw-Hill Companies. Mary Costain (Apollo ’s treasurer). C:/AudComMins—101807.. 2013 Apollo Shoes. . Inc. Inc.doc/ McGraw-Hill/Irwin 8 © The McGraw-Hill Companies. or the taking of any action based on it. Inc. McGraw-Hill/Irwin Apollo Shoes.doc>>. contact you to provide you with any other information that you need. but Darlene Wardlaw said that you were busy with another client. I’ve attached one that we sent out to all shareholders with the Letter to Shareholders attached. copying. Please let me know what my staff or I can do to help the audit go smoothly for you.doc>>. Do you play golf? This Apollo message (including any attachments) contains confidential information intended for a specific individual and purpose.com> Subject: Attached 10-K Filing Attachments: <<Shareholder Letter. She asked that I forward a copy of our 10-K directly to you. Larry P. you should delete this message and are hereby notified that any disclosure. © The McGraw-Hill Companies.. is strictly prohibited. I will have Karina Ramirez. and is protected by law. I’ve attached a copy of Apollo’s organizational table. our Director of Internal Audit. <<ApolloShoesOrgChart. <<10K.S.Date: 22 OCT 2011 4:43:17 +0000 From: "Larry Lancaster" <LLancaster@ApolloShoes. 2013 9 . If you are not the intended recipient.xls>> I am sorry that you were unable to attend the audit meeting last week. or distribution of this message. Inc. Due to the conflicts in foreign countries. the past year has been one of the most dynamic and exciting years since I began my tenure at Apollo Shoes. 2013 Apollo Shoes. led by the flagship products SPOTLIGHT (for athletes who like to compete at night) and SIREN (designed specifically for police officers working the graveyard shifts in our nation's most dangerous cities) have met widespread acceptance. Apollo Shoes. We continue to work on and improve the SPEAKERSHOE. now has the possibility to take a leadership role in the galactic athletic footwear market. Our product lines. and uncertainty with the Federal Reserve's adjustments of interest rates.. the shoe's flashing lights are designed to go off after every team goal! Our strategic management plans have allowed us to maintain a positive trend in income over the past several years. the technological superiority of our products is at the point where our sales are limited only by the technological inferiority of other scientific fields (specifically. Inc." We are hard at work on new ideas.'s research and development team. has adapted itself to meet the needs of all its galactic customers and to take advantage of all opportunities supplied by exploration of new frontiers. Back here on earth. Our focus is in exactly the opposite direction. In actuality. Although sales were not as strong as we had anticipated.Letter to Fellow Shareholders Dear Fellow Shareholders. Inc. As space exploration continues. Inc. we have decided to use this excitement to reach out further in our continuing mission: to make a difference in this galaxy. such as the PHONESHOE. From the beginning. our marketing plans will allow us to bounce back next year. We have signed with some of this world's premier athletes as spokespersons for our products. I am proud of their responses. Inc. Next year appears even better! The strength of our results for the past year should not be confused with the truth of the times. This was a uniformly difficult year for all businesses. Inc. fewer earth consumers are buying our state-ofthe-art athletic equipment. Apollo Shoes. we intend to be among the first to market our products in new worlds. Apollo Shoes. It is there that our technological advances in light and sound can combine with our rugged footwear to propel all galactic sports participants to their fullest potential. With the advent of significant new breakthrough technology by Apollo Shoes. therefore. . All of our operating divisions were severely tested. the sneaker with a cellular phone for those executives who like to simultaneously combine exercise McGraw-Hill/Irwin 10 © The McGraw-Hill Companies. Our net income for the year has been the best since we began operations four years ago. You may have noticed our competitor's focus on earth-bound activities and athletes. After a record year when most companies may have wanted to relax and play it safe. but we are now committed to expanding our marketing focus. including a recent winner of the grueling Alaska Iditarod who used his SPOTLIGHTs to guide his dogs to a late night finish line. given the state of the galactic economy. With new applied technologies. consumer confidence has been negatively affected. Apollo Shoes. can maintain its tradition of high tech electronic performance and style. Inc. an athletic shoe with an amplified loudspeaker. and this was no easy task. has always been known for its leadership position in electronic shoe technology. Inc. We are currently negotiating with a soccer league to exclusively use our SIRENs. originally designed for the international recording group "Mythic Meathook. current transportation means). We look forward to the challenge. We anticipate that the PHONESHOE will capture a significant piece of this quickly expanding market. Inc. and quality are critical elements for future success. At Apollo Shoes. better. President and CEO McGraw-Hill/Irwin Apollo Shoes." it is critical to continue this tradition because production. Larry Lancaster Chairman.with work. Inc. 2013 11 . we like to briefly acknowledge achievement and then proceed to new challenges. Inc. faster. speed. This year was great only because it provided us with resources to expand operations and further technological progress. © The McGraw-Hill Companies... As we continue into this century of "more. Doc>> McGraw-Hill/Irwin 12 © The McGraw-Hill Companies.. 2013 Apollo Shoes. .<<Shareholder Letter. Inc. Inc. 8. [X] As of March 8.00 PER SHARE STUDS SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months. 2010 for the Annual Meeting of Shareholders to be held on Tuesday. 2011. PAR VALUE. As of March 8. © The McGraw-Hill Companies. 2010 COMMISSION FILE NUMBER 1-9Z40 APOLLO SHOES INC.. in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.C.-------------------------------SECURITIES AND EXCHANGE COMMISSION WASHINGTON. McGraw-Hill/Irwin Apollo Shoes. 2011. Inc. 2013 13 . DOCUMENTS INCORPORATED BY REFERENCE Definitive Proxy Statement dated December 12. 2011 at the End of the Universe Restaurant in downtown Shoetown.000 shares of the registrant's Common Stock were issued and outstanding. Inc.) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS ------------------- NAME OF EACH EXCHANGE ON WHICH REGISTERED ----------------------------------------- COMMON STOCK. 20549 -----------------------FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MAINE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) X8-061325 (IRS EMPLOYER IDENTIFICATION NO.105.000. to the best of registrant's knowledge. the aggregate market value of the registrant's voting stock held by non-affiliates of the registrant was approximately $24. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein. D. and (2) has been subject to such filing requirements for the past 90 days. February 22. $1.315. and will not be contained. ...................................... Item 7.......i Properties.. ............... Changes in and Disagreements with Accountants ...................................... xix Item 14.v Item 8......................... Executive Compensation. Item 6.....ii Legal Proceedings............. Item 3........................................................................................ Inc.....................................................xix Item 12................iii Submission of Matters to a Vote of Security Holders............. Item 5.............iii Market for Registrant's Common Equity and Related Stockholder Matters............................ Inc............. Security Ownership of Certain Beneficial Owners and Management.....................iii Selected Financial Data..... Exhibits...... Business................... Item 4.............. 2013 Apollo Shoes........................................... Directors and Executive Officers of the Registrant..............................xix Item 11.................... Financial Statements and Supplementary Data............xix Item 10........................ Certain Relationships and Related Transactions........................................ Financial Statement Schedules and Reports on Form 8-K........ xix Item 13.................iv Management's Discussion and Analysis of Financial Condition and Results of Operations.................. ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS Item 1....xx McGraw-Hill/Irwin 14 © The McGraw-Hill Companies...............vi Item 9................................APOLLO SHOES INC........... Item 2....................................................... and warehouse facility in the Shoetown. Any such statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from those discussed in such forward-looking statements." "intend. The Company’s brands-. The Company is excited about this annual event that exhibits to the entire world the skills and spirit of outstanding Swiss aquatic athletes. indicate or imply future results. and may contain the words "believe. Inc." "expect. earnings. Apollo operates from a large office. inventory. Apollo Shoes. Forward-looking statements include. Inc. Prospective information is based on management's then current expectations or forecasts. Organization and Personnel Apollo Shoes is a medium-sized corporation. Inc." "may. cash flow." or any variations of such words or other words with similar meanings. ITEM 1. 2013 15 . The company is subject to the reporting requirements of the Securities and Exchange Act of 1934." "anticipate. © The McGraw-Hill Companies. plans. incorporated in the state of Delaware.are used extensively in many athletic competitions. actions." "could. i McGraw-Hill/Irwin Apollo Shoes. BUSINESS. any statement that may predict. orders. and SPEAKERSHOE-. It has over 100 employees organized in five departments headed by vice presidents." "will be. SPOTLIGHT. strategies and objectives. The company stocks a wide range of shoe products and has a large base of retail store customers.This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. operations. become inaccurate." "plan." "might. Maine area.. including statements with regard to the Company's revenues. No one presently owns more than 4 percent of the outstanding common stock. Such information is subject to the risk that such expectations or forecasts. or the assumptions underlying such expectations or forecasts." "estimate. spending. forecast. such as the Switzerland Watersports Games in Zurich. products. Marketing The marketing department handles advertising and direct contact with customers." "project.SIREN. performance or achievements. Its stock is traded in the over-the-counter market." "will result. margins. (the “Company”) is a planetary distributor specializing in technologically superior athletic podiatric products. the advertising staff. is a public corporation. The marketing department vice president supervises the sales staff. Apollo Shoes. without limitation." "will continue. The Company’s products are shipped to large and small retail outlets in a six-state area. and the customer relations staff. the Company leased most of the properties that were used in its business. and two machine operators. inventory records department. Inc. general ledger department. and shipping to serve customer demand. the department also has the mailroom and the personnel department. Operations The operations department contains production planning specialists and some production control professionals.. .000 square feet of space. and financial statement department. Until February of 2010. Its corporate headquarters relocated at that time to office facilities in Shoetown.Finance The finance department has two subordinate offices—the treasurer and the controller. The department also supervises the timekeepers. the staff consists of a Director of IS (information systems). the Company occupies approximately 10. who assist the marketing department in technical matters and assist customers with product specifications. a systems development project manager and two programmer/analysts. ii McGraw-Hill/Irwin 16 © The McGraw-Hill Companies. 2013 Apollo Shoes. At present. accounts payable/cash disbursements department. and shipping. the director was promoted to vice president. Apollo obtained a wireless local area network (LAN) multiserver soon after and began testing the hardware and software. inventory. This warehouse and distribution center is located approximately one mile from the Company headquarters and contains approximately 450. thus reducing training and employee objections to the computer. every effort was made to keep as many as possible of the procedures and business documents used in the manual system. Operations supervisors supervise hourly workers who move products from receiving.000 total square feet of usable space. with some inventory managers. PROPERTIES. accounts receivable/cash receipts department. payroll department. Inc. When the information systems department became active. The treasurer supervises the cashiers and the cash management professionals. an operations manager (who also serves as the librarian and control clerk). For reasons lost to history. Information Systems An information systems department was created this past year. A lease on an operations facility expires on June 30. who maintain the workers’ time clocks and collect payroll time cards. Since the new computer system was designed and customized to Apollo’s needs. ITEM 2. At its corporate headquarters. receiving. Maine. The operations department contains the critical functions of purchasing. This made the transition to the computer system easy on the employees. 2011. The controller’s office has the following departments and personnel: billing department. Inventory storekeeping responsibility is also in this department. . and Dealers System (STUDS) under the symbol APLS. Future dividend policy will depend upon the Company's earnings. derived from data supplied by STUDS. As of December 31. sets forth the quarterly high and low sale prices during 2010 and 2009. 2010.000. The Company has never paid cash dividends on its Common Stock and the Board of Directors intends to retain all of its earnings to finance the development and expansion of its business. was $3 1/4 per share. ITEM 4. 2010. No matter was submitted during 2010 to a vote of security holders. On September 15. the Company felt that the settlement would be preferable to a long litigation process.000 shareholders.342 holders of record of the Company's Common Stock including those shares held in "street name. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. © The McGraw-Hill Companies. 2013 17 . there were approximately 15. LEGAL PROCEEDINGS. net of a tax benefit of $7. The Company's common stock is quoted on the Security Traders. Inc. there can be no assurance that the Company can successfully expand its operations. However. 2010. The final settlement totaled $11.172.ITEM 3. 2010 First Second Third Fourth High 14 5/8 11 8 1/4 5 5/8 2009 Low 3 3/8 2 5/8 3 1/4 3 1/8 High 4 4 5/8 8 1/8 11 1/2 Low 3 1/2 4 1/4 4 5 The stock price at closing on December 31.477. McGraw-Hill/Irwin Apollo Shoes. and other factors considered relevant by the Company's Board of Directors.695. Inc. the Company agreed to settlement of a suit brought against the Company by a competitor for patent infringement for the Company's use of the Siren.000). The following table. or that such expansion will prove profitable. ITEM 5. Underwriters. capital requirements.000 ($19." The Company believes that it has in excess of 16. financial condition. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. While the Company denies any wrongdoing. through the solicitation of proxies or otherwise. 754 $6.634 $636 $502 $4.299 $182.iii ITEM 6.575 $236.794 $21.866 ($1.356) Total Assets $36..880 Long-Term Debt Shareholders' Equity McGraw-Hill/Irwin 18 © The McGraw-Hill Companies. Inc.590 $1. APOLLO SHOES.304 $6.55 $0.062 $0 $0 $0 $0 $22.54 $0.482 $16.337 $54. 2013 Apollo Shoes.271 $21. SELECTED FINANCIAL DATA.371 $1.255 $0.119 $17.920 Income Before Taxes $26. INC.680 $2. .44 Net Income Earnings Per Share Balance Sheet Data As of December 31.209 $138. in thousands (except per share data) Income Statement Data Year Ended December 31 2010 Net Sales 2009 2008 2007 $240.951) ($2.22 $0. 2010 2009 2008 2007 Working Capital $20. Inc.745 $1.226 $1.748 $5.470 $3.757 Income Taxes $10. 2013 19 . 2010 were 5% of net sales and increased by 10% when compared to the year ended December 31.482 million and anticipated working capital to be generated by future operations will be sufficient to support the Company's working capital requirements for the foreseeable future. 2010 was 30% of net sales as compared to 26% for the year ended December 31. when compared to the same period in 2009. Total research and development expenses for the year ended December 31. The average selling price per product in the year ended December 31. Liquidity and Capital Resources The Company's principal source of operating funds has been from proceeds from short-term borrowing against a $50 million line of credit.iv ITEM 7. 2009. Research and development activities were focused on continued development of PHONESHOE and SPEAKERSHOE technology. Management believes that the effect of inflation on the business of the Company for the past three years has been minimal. 2009. Gross profit for the year ended December 31. The Company vehemently denies any wrongdoing in the matter. The decrease was primarily due to higher prices charged by our suppliers for raw materials. the Company foresees no problems with renewal for the foreseeable future. Selling. The sales growth was primarily due to new products introduced during the 2010 fiscal year. lengthy litigation process. McGraw-Hill/Irwin Apollo Shoes.998. There are no other significant capital requirements identified at this time. The Company believes that its current working capital of $20.000. general and administrative expense for the year ended December 31. The Company intends to use its capital resources to expand its operations facilities and to increase research and development in order to maintain its competitive advantage in podiatric technology. Rather than face a costly. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2010 Financial Results Net sales for the year ended December 31. The increase of 16% to $71. 2009.575. 2010 increased approximately 2% from the year ended December 31. 2010 was 41% of sales compared with 49% for the year ended December 31. the Company decided to settle out of court. 2010 increased 2% to $240. Inc. The increased professional fees were primarily related to the settlement of litigation brought against us by a competitor..000 was primarily the result of increases in staffing and increased professional expenses. The increase was primarily due to the addition of engineering personnel. While the credit facility must be renewed each year. 2009. Inc. © The McGraw-Hill Companies. Inc. 2013 Apollo Shoes. Inc. .v McGraw-Hill/Irwin 20 © The McGraw-Hill Companies.. 949 0 ($1. Net of tax benefit Extraordinary Item.745 $1. in thousands (except per share data) For year ended. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED STATEMENTS OF INCOME APOLLO SHOES. INC.998 $875 ($204) $61. © The McGraw-Hill Companies.210) $26.44) $0.006 $236. Inc.271 $16.105 8.301) ($11. 2013 21 .569 $99.046 ($31.880 $115.371 $1.419 $71.680 $21.ITEM 8.22 8.08 ($3.86) $0.695) $4.066 $54. Net Sales (Note 2) Cost of Sales Gross Profit Selling.54 $4.575 $141. Net of tax benefit (Note 10) Net Income Earnings Per Common Share From Continuing Operations Other Net Income Weighted shares of common stock outstanding 2010 2009 $240.299 $120.. General and Administrative Expenses Interest Expense (Note 7) Other Expense (Income) Earnings from Continuing Operations Before Taxes Income Tax Expense (Note 9) Earnings from Continuing Operations Discontinued Operations.337 $10. Inc.105 The accompanying notes are an integral part of the consolidated financial statements.98 ($1.634 $33. December 31. vi McGraw-Hill/Irwin Apollo Shoes. 105 Additional Paid-in Capital 7. 2013 Apollo Shoes.304 Prepaid Expenses Total Assets Liabilities and Shareholders’ Equity Current Liabilities Long-Term Debt (Note 7) Total Liabilities The accompanying notes are an integral part of the consolidated financial statements.556 Short-Term Liabilities (Note 7) 10.245 $3.743 Retained Earnings 6. Inc. Inc.743 7.119 $17..556 0 0 $14.794 $21.556 Common Stock 8. in thousands As of December 31 2010 2009 Assets Cash $3.900 Total Shareholders' Equity $22.675 $3.794 $21.271 1.CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION APOLLO SHOES.509 Accounts Receivable (Net of Allowances of $1.813 13.174 300 Less Accumulated Depreciation (164) (31) $1.148 2.823 951 352 Current Assets $35.675 3. .304 Accounts Payable and Accrued Expenses $4.105 8.157 $20.748 Total Liabilities and Shareholders' Equity $36. and Equipment (Note 5) 1.738 Inventory (Note 4) 15.675 3.010 $269 Investments (Note 6) 613 613 Other Assets (Note 6) 14 0 $36.422 Property. Plant. INC.000 0 $14. respectively) (Note 3) 15.263 and 210. McGraw-Hill/Irwin 22 © The McGraw-Hill Companies. Inc.. 2013 23 . Inc.vii McGraw-Hill/Irwin Apollo Shoes. © The McGraw-Hill Companies. 2010 $0 8.119 The accompanying notes are an integral part of the consolidated financial statements.371 $0 $0 Other Balance.745 232 $232 $301 $533 Other 5..900 $0 $4. December 31.105 $8. Inc.743 $6. McGraw-Hill/Irwin 24 © The McGraw-Hill Companies. . December 31. 2008 Shares Par Value ($1 per share) Additional Paidin Capital Retained Earnings Other Total 2.371 0 $17. in thousands Balance.105 $7.000 $10. 2013 Apollo Shoes.000 Balance.743 Net Income Exercise of Stock Options $1.105 $8.271 $0 $22.745 $1.470 Net Income Exercise of Stock Options $1.000 $5. December 31.442 $155 $0 $5.CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY APOLLO SHOES.748 $4. Inc.000 $5.873 $2.873 $2. INC.105 $7. 2009 8. 2013 25 . Inc. © The McGraw-Hill Companies. Inc.viii McGraw-Hill/Irwin Apollo Shoes.. 533 ($264) $3.000 Proceeds from the Issuance of Common Stock Net Cash Provided by Financing Activities $10.245 $3.533 $10.504 ($13.073) ($1.509 Net Increase (Decrease) in Cash The accompanying notes are an integral part of the consolidated financial statements. in thousands For the year ended December 31.509 $13 Cash at End of Year $3.119 $5. McGraw-Hill/Irwin 26 © The McGraw-Hill Companies..990) ($11.496 Cash at Beginning of Year $3.527) ($9.745 $133 $26 ($12. 2010 2009 Cash Flows from Operating Activities Net Income $4.410) ($2. 2013 Apollo Shoes. Inc.782) ($874) ($255) Adjustments to Reconcile Net Income to Net Cash Provided Depreciation and Amortization Changes in Operating Assets and Liabilities Decrease (Increase) in Current Assets Accounts Receivable Inventory Prepaid Expenses Increase (Decrease) in Current Liabilities Accounts Payable and Accrued Expenses Total Adjustments Net Cash Provided by Operating Activities Cash Flows from Investing Activities Capital Expenditures Purchase of Other Assets Net Cash Provided by Investing Activities ($14) ($888) ($255) Cash Flows from Financing Activities Proceeds from the Issuance of Debt $10. Inc.371 $1. INC. .861) ($599) ($123) $1.376) ($6.000 $10.CONSOLIDATED STATEMENTS OF CASH FLOWS APOLLO SHOES.747) ($8. Inc.ix McGraw-Hill/Irwin Apollo Shoes.. 2013 27 . © The McGraw-Hill Companies. Inc. Inventory valuation Inventories are stated at the lower of First-in. and $0.9 million. 2.5 million.1 million. Income taxes Deferred income taxes are provided for the tax effects of timing differences in reporting the results of operations for financial statements and income tax purposes. 2010 and 2009. Significant Customers Approximately 15%. The Company uses the straight-line method of depreciation for all additions to property. SPOTLIGHT. Cash equivalents Cash equivalents are defined as highly liquid investments with original maturities of three months or less at date of purchase. and SPEAKERSHOE. including SIREN. and 11% of sales are to one customer for years ended December 31. and $0. and by the equity method for investments greater than 20% but less than 50%. and relate principally to valuation reserves for accounts receivable and inventory. Inc. Marketable Securities Investments are valued using the market value method for investments of less than 20%. Net income per common share Net income per common share is computed based on the weighted average number of common and common equivalent shares outstanding for the period. Reclassification Certain amounts have been reclassified to conform to the 2010 presentation. Intangibles Intangibles are amortized on the straight-line method over periods benefited. and net of warranty expenses of $1. Summary of Significant Accounting Policies Business activity The Company develops and markets technologically superior podiatric athletic products under various trademarks. .. respectively.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APOLLO SHOES. INC. accelerated depreciation and unearned compensation. Property and equipment and depreciation Property and equipment are stated at cost. 1.9 million. respectively. First-out (FIFO) or market. McGraw-Hill/Irwin 28 © The McGraw-Hill Companies. respectively. Net Sales Sales for 2010 and 2009 are presented net of sales returns and allowances of $4. Inc. 2013 Apollo Shoes. plant and equipment. © The McGraw-Hill Companies.x McGraw-Hill/Irwin Apollo Shoes. 2013 29 . Inc.. Inc. Inventories Inventories consist of the following at December 31: in thousands Siren Speaker Spotlight Less Reserve for Inventory Obsolescence Ending Inventory 2010 $3.000.411 0 16.411 (1. Plant and Equipment McGraw-Hill/Irwin 30 $1.156 18.622..825 (3. plant and equipment Less Accumulated depreciation 1. Property and Equipment at December 31 was as follows: in thousands 2010 Land Buildings and Land Improvements Machinery. Accounts Receivable Accounts Receivable consists of the following at December 31: in thousands Trade Receivables Employee and Officer Receivables Less Allowance for Doubtful Accounts Net Accounts Receivable 2010 $16.012) $15. Inc.148 Amount charged to bad debt expense for the year ended December 31. Inc. 4.010 © The McGraw-Hill Companies.098 9.174 (164) Net Land.3. 2010 was $1. Writeoffs for the year were approximately the same. Property and equipment Property is stated at cost net of accumulated depreciation.571 6. 2013 Apollo Shoes. Equipment and Office Furniture $117 624 433 Total Land.813 5.263) $ 15. . 2013 31 . Inc.. Inc. © The McGraw-Hill Companies.xi McGraw-Hill/Irwin Apollo Shoes. the Company had $10. 2010. Debt At December 31. The interest rate charged on this agreement is the Prime Rate plus 3%.6 million and $3. xii McGraw-Hill/Irwin 32 © The McGraw-Hill Companies. the Company invested approximately $0. 2013 Apollo Shoes. Inc.6. In addition. 2010 and 2009 was $2.7 million. The line of credit is secured by the Company’s inventory. Inc. respectively. SHOCK-PROOF SOCKS did not recognize any income and did not pay any dividends in 2009 and 2010.000 0 $10. This credit line is evaluated annually on June 30 by the lending institution.000 in legal fees to register the patent for the PHONESHOE. on December 31.000. 2010. This investment is valued in the financial statements using the Equity method. Commitments Annual obligations under non-cancelable operating leases are as follows: 2011 Thereafter $1. 7. the Company incurred approximately $14.6 million in stock for a 25% share in the SHOCK-PROOF SOCKS Company in 2009. Annual maturities of debt obligations are as follows: 2011 2012 Total Debt $10. .000.000 outstanding in short-term borrowings under a $50 million secured revolving credit line with a local financial institution.000 0 Rent expense charged to operations for the years ended December 31.000.200.000 8. Investments and Other Assets In order to receive a higher rate of return on its excess liquid assets.. Currently.000).0% 39.477. 2010.0% 39..6% 10. 2010.9.695. the Company purchased its operating facility and equipment from a company controlled by two previous directors and shareholders of the Company for $623.000 ($19. Income taxes The provision (benefit) for income taxes consists of the following for the years ended December 31: Current: Federal State Deferred: Federal State 2010 2009 $ 2.000. and relate principally to valuation reserves for accounts receivable and inventory. 2013 33 . The final settlement totaled $11. A reconciliation of the statutory federal income tax provision to the actual provision follows for the years ended December 31: Federal Statutory Rate State taxes. Inc. less federal benefit Research and experimentation credit Other Effective Tax Rate 2010 2009 34. 11.000 per month.0% 34. the Company felt that the settlement would be preferable to a long litigation process.172. Litigation On September 15. The Company’s lease ends in June 2011 at which time all operations will be moved to the central headquarters building. xiii McGraw-Hill/Irwin Apollo Shoes.905. net of a tax benefit of $7.0% 6.025 365 $ 2.0% (1.794 $ 978 Deferred income taxes are provided for the tax effects of timing differences in reporting the results of operations for financial statements and income tax purposes. Inc.0%) 1.92. © The McGraw-Hill Companies.390 $ 873 154 $ 1. Related-party transactions On February 1.0% (2. accelerated depreciation and unearned compensation. the Company agreed to settlement of a suit brought against the Company by a competitor for patent infringement for the Company's use of the Siren.027 $ 340 64 $ 404 $ (42) (7) $ (49) $ 2. While the Company denies any wrongdoing.0% 6. the Company leases a second facility and equipment from the same company for approximately $200.4%) 1. Corporate policy limits the amount of credit exposure to any one financial institution. The Company performs on-going credit evaluations of all of its customers and generally does not require collateral.12.. Concentrations of credit risk Financial instruments which potentially subject the Company to credit risk consist principally of trade receivables and interest-bearing investments. 2009 and 2008 were $3 million. Europe and Asia Pacific. Employee benefit plans The Company sponsors a defined-contribution retirement plan covering substantially all of its earth employees. as well as enter into long-term relationships with two other large retail distributors. 13. The Company sells a significant amount of its product to one retail distributor with sales operations located throughout North America. The Company maintains adequate reserves for potential losses and such losses. McGraw-Hill/Irwin 34 © The McGraw-Hill Companies. $3 million and $3 million. respectively. which have been minimal. . Inc. have been included in management's estimates. 2013 Apollo Shoes. Aggregate contributions made by the Company to the plans and charged to operations in 2010. The Company is currently negotiating to increase its sales to that company. Inc. The Company places substantially all its interest-bearing investments with several major financial institutions. Contributions are determined at the discretion of the Board of Directors. © The McGraw-Hill Companies.. Inc. 2013 35 .xiv McGraw-Hill/Irwin Apollo Shoes. Inc. 2. is made known to us by others within those entities. Larry Lancaster and Joe Bootwell. in light of the circumstances under which such statements were made. fairly present in all material respects the financial condition.CERTIFICATIONS We. 2013 Apollo Shoes. 4. and for. or caused such disclosure controls and procedures to be designed under our supervision. including its consolidated subsidiaries. Based on our knowledge. Based on our knowledge. President and CEO Joe Bootwell Executive Senior Vice-President and CFO McGraw-Hill/Irwin 36 © The McGraw-Hill Companies. and b) Any fraud.. or is reasonably likely to materially affect. process. results of operations and cash flows of the registrant as of. Inc. not misleading with respect to the period covered by this report. as of the end of the period covered by this report based on such evaluation. Date: February 1. particularly during the period in which this report is being prepared. certify that: 1. to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record. to ensure that material information relating to the registrant. based on our most recent evaluation of internal control over financial reporting. whether or not material. and c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected. 3. that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. We have disclosed. We are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures. b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures. and other financial information included in this report. Inc.. We have reviewed this annual report on Form 10-K of Apollo Shoes. summarize and report financial information. . Inc. 2011 Larry Lancaster Joe Bootwell Larry Lancaster Chairman of the Board of Directors. the periods presented in this report. and 5. the financial statements. the registrant’s internal control over financial reporting. this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made. Inc.xv McGraw-Hill/Irwin Apollo Shoes. Inc. 2013 37 .. © The McGraw-Hill Companies. INC.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of APOLLO SHOES. Inc. . McGraw-Hill/Irwin 38 © The McGraw-Hill Companies. 2013 Apollo Shoes. Inc.. 2010. and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Because of its inherent limitations. We believe that our audits provide a reasonable basis for our opinions. evaluating management’s assessment. for maintaining effective internal control over financial reporting.S. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that. Our responsibility is to express an opinion on these financial statements. and for its assessment of internal control over financial reporting. assessing the accounting principles used and significant estimates made by management. 2010. INC. generally accepted accounting principles. or disposition of the company’s assets that could have a material effect on the financial statements. INC. based on the COSO criteria. accurately and fairly reflect the transactions and dispositions of the assets of the company. an opinion on management’s assessment. and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition. Also. testing and evaluating the design and operating effectiveness of internal control. maintained effective internal control over financial reporting as of December 31. in all material respects. 2010. and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company. the financial position of APOLLO SHOES. 2010 and 2009 and the related consolidated statements of income. We have also audited management’s assessment.. In our opinion. Inc. on a test basis. © The McGraw-Hill Companies. and performing such other procedures as we considered necessary in the circumstances. APOLLO SHOES. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. INC. included in the accompanying Management’s Report on Internal Control Over Financial Reporting. projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions. McGraw-Hill/Irwin Apollo Shoes. or that the degree of compliance with the policies or procedures may deteriorate. APOLLO SHOES’ management is responsible for these financial statements. in all material respects. based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria). maintained. that APOLLO SHOES. Inc. shareholders’ equity. Also in our opinion. effective internal control over financial reporting as of December 31. use. 2010 and 2009 and the results of its operations and cash flows for each of the two years in the period ended December 31.We have audited the accompanying consolidated statements of financial condition of APOLLO SHOES. evidence supporting the amounts and disclosures in the financial statements. and evaluating the overall financial statement presentation. and cash flows for each of the two years in the period ended December 31. Our audit of the financial statements including examining. as of December 31. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting. (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles. INC. as of December 31. in reasonable detail. 2010 in conformity with U. the consolidated financial statements referred to above present fairly. 2013 39 . Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. internal control over financial reporting may not prevent or detect misstatements. Maine January 25. 2011 McGraw-Hill/Irwin 40 xvi © The McGraw-Hill Companies. Inc. . 2013 Apollo Shoes. CPA's Shoetown.Smith & Smith.. Inc. 2013 41 . The Twenty-First National Bank of Maine Shareholder Correspondence Post Office Box 1 Shoetown. lost certificates and consolidation of accounts. Inc. 2010 at the End of the Universe Restaurant in downtown Shoetown. CPA's 31st Financial Avenue Shoetown.CORPORATE INFORMATION Auditors Smith & Smith. ME 00002 Form 10-K For a copy of the Form 10-K Annual Report.m. 2010 were entitled to vote at the meeting. and the SPOTLIGHT Designs are registered trademarks of Apollo Shoes. February 23. Inc. xvii McGraw-Hill/Irwin Apollo Shoes. on Tuesday. The PHONESHOE. filed with the Securities and Exchange Commission write to: Office of Investor Relations Apollo Shoes Inc. SPEAKERSHOE. ME 00002 Transfer Agent and Registrar The Twenty-First National Bank of Maine is the Transfer Agent and Registrar for the Company's common stock and maintains shareholder accounting records. © The McGraw-Hill Companies. The Transfer Agent should be contacted on questions of changes in address. Shareholders of record on February 14.. Inc. name or ownership.. SIREN. 100 Shoe Plaza Shoetown. local time. ME 00001 Annual Meeting The Annual Meeting of Shareholders was held at 10:00 a. Marketing Daisy Gardner Vice-President . Unum Vice-President .Finance *Fritz Brenner President The Widget Corporation *Ivan Gorr President Far More Drugs.Operations Eric.. PH. CPA Professor of Accountancy and Typing Graduate School of Business and Clerical Skills CORPORATE OFFICERS Larry Lancaster Chairman. President and CEO Joe Bootwell Executive Senior Vice President and CFO Fred Durkin Vice-President . Eric.Finance Sue D. Unum Vice-President . P. *Theodore Horstmann Minister of Commerce Anglonesia *Josephine Mandeville.BOARD OF DIRECTORS Larry Lancaster Chairman. INC. Inc. Fultz Vice-President . *Harry Baker Executive Vice President and Treasurer Iguana Growers of America Inc.Legal Affairs Mary Costain Treasurer Jeff Chesnut Secretary * External Directors xviii McGraw-Hill/Irwin 42 © The McGraw-Hill Companies. P. Inc.D. . Inc. President and CEO APOLLO SHOES. 2013 Apollo Shoes.. no management personnel hold stock ownership in the Company ITEM 13.92.500 1.000 per month. Vice-President .000 590 410 ITEM 12. Currently. EXECUTIVE COMPENSATION (Approximate amounts expressed in thousands) Larry Lancaster. Unum. The auditors expressed concerns about “mutually incongruent goals. the Company purchased its operating facility and equipment from a company controlled by two previous directors and shareholders of the Company for $623. P.200 1. 2010. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS Smith and Smith. withdrew as the Company’s auditors after completing the 2010 audit. Chairman. The two previous directors are no longer associated with Apollo Shoes. Currently. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. President and CEO Sue D. ITEM 11. the Company leases a second facility and equipment from the same company for approximately $200. Eric Unum (Vice-President – Finance) is also a member of the board. The Company’s lease ends in June 2011 at which time all operations will be moved to the central headquarters building. Vice-President – Operations $2. ITEM 10.Legal Affairs Joe Bootwell. along with five outside (independent) directors who never worked for the Apollo organization. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The president.ITEM 9. Executive Senior Vice President and CFO Fred Durkin. Larry Lancaster. CPAs. Fultz. is both chairman of the board of directors and President and chief executive officer (CEO).500 1. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.” The Company is considering legal action against the firm. Vice-President – Marketing Eric.905. On February 1. xix . Three outside board members constitute the audit committee of the board. Vice-President – Finance Daisy Gardner. 575 Gross Profit $24. It is incorporated in this document by reference.282 $99. EXHIBITS.347 $20.36 $0. FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K QUARTERLY RESULTS OF OPERATIONS (Unaudited) 2010 March 31 June 30 September 30 December 31 Total Net Sales $58. & A Expenses $16.54 Net Income Earnings Per Share The Company filed one 8-K dealing with the withdrawal of its auditor on January 30.454 ($7.815 $4.Doc>> xx .55 ($0.59 $0.887 $4.478 $71. <<10-K.236 $59.478 $17.356 $25.785) $2.372 $24.341 $240.006 S.998 $4.996 $24.759 $60.ITEM 14.371 $0. 2011.239 $62.695 $17.96) $0.G. President.xls>> Fred Durkin VPMarketing Credit Manager . & CEO Internal Audit Karina Ramirez Joe Bootwell Executive Sr.Finance Mary Costain Treasurer Ernst Hathaway VP – Info Systems Samuel Carboy Controller <<ApolloShoesOrgChart.Apollo Shoes Inc. Organizational Chart As of 9/30/2011 Board of Directors Audit Committee Larry Lancaster Chairman.Operations Eric Unum VP. VP & CFO Sue Fultz Legal Affairs Daisy Gardner VP. I have attached a copy of our accounting and procedures manual. or the taking of any action based on it.xls>> Date: 25 OCT 2011 07:14:35 +0000 From: "Karina Ramirez" <
[email protected]> Subject: Upcoming Apollo Shoes Engagement Attachment: <<APManual. copying. or distribution of this message. Please let us know if there is anything else we can provide you to make your job easier. We look forward to your upcoming fieldwork. and is protected by law. Karina Karina Ramirez Director. This Apollo message (including any attachments) contains confidential information intended for a specific individual and purpose. Inc. you should delete this message and are hereby notified that any disclosure. If you are not the intended recipient. . is strictly prohibited.<<ApolloShoesOrgChart.doc>> Per your request. Internal Audit Apollo Shoes. and missing invoices must be located and explained. The general ledger supervisor shall approve all monthly summary entries before they are posted to the general ledger. They may also prepare reconciliations without prior notice given to cash management personnel. The marketing vice president shall periodically analyze sales activity by product lines in comparison to budgets and forecasts and prior years’ activity. utilizing the payroll register retained by the treasurer’s office. The payroll bank account is also reconciled. the total of the trial balance of customer account balances (prepared by the accounts receivable department) shall be reconciled to the general ledger control account by the general ledger supervisor. Charges to customer accounts should be dated the date of shipment. Discrepancies shall be investigated to help assure that the customer subsidiary accounts are posted for the same total amount posted to the control account. Sales invoice batches shall be dated with the date of shipment. When sales invoices are recorded. after initiation by customer relations personnel.Apollo Shoes Accounting and Control Procedure Manual Sales and Accounts Receivable Daily batches of sales invoices shall be analyzed by sales totals in the athletic shoes product lines. and totals of batches (including product line sales for athletic shoes) shall be accumulated each month and recorded in the accounts receivable control and sales revenue accounts. Cash Management The monthly bank statements shall be mailed to the cash management department in the treasurer’s office. internal auditors will occasionally make unannounced reviews of the bank account reconciliations. At the discretion of the director of internal audit. The general ledger supervisor shall compare the copy 2 daily batch total with the copy 4 individual accounts posting total sent from the accounts receivable department. Personnel use the duplicate deposit slips retained when bank deposits were made. the numerical sequence shall be checked by an accounts receivable clerk. Cash management personnel shall compare cash receipts journal daily deposit records with the bank deposits and duplicate deposit slips when the general bank account reconciliation is performed. Sales credits are coded to three product line sales revenue accounts. and the cash disbursements listing to reconcile the general bank accounts. . The treasurer shall approve all cash refunds and allowance credit memos for sales returns. The items shipped shall be compared to the items billed for proper quantity. price. the cash receipts journal listing. and other sales order terms. At the end of each month. and capital additions less than $5. including reimbursements of the petty cash funds. Inventory Perpetual Records Inventory additions shall be dated with the date of the receiving report. Statements of accounts receivable balances shall be mailed to customers each month by the accounts receivable accounting department. maintenance. the additional expenditure shall be approved by the treasurer and board of directors.” Blank check stock shall be kept under lock and key in the accounts payable accounting department. Customers’ reports of disputes or differences shall be handled by customer relations personnel in the marketing department.000 shall be expensed. Useful life and depreciation method assignments for financial statement calculations shall follow these general guidelines: Buildings Equipment Declining Balance Declining Balance 15 years 3-6 years All repair. Checks shall be made payable to a named payee and not to “cash. Under no circumstances may blank checks be signed by the treasurer. Cash disbursement journal entries shall be dated with the date of the check. The accounts receivable department shall post credits to individual customer accounts.Cash Receipts and Accounts Receivable Processing All cash receipts from customers related to sales shall be credited to accounts receivable individual and control accounts. Zero salvage values shall be used in all depreciation calculations. . in advance if possible. Voided and spoiled checks shall be transmitted to the treasurer for inspection and later filed in numerical order with paid checks. Cash Disbursements All disbursements shall be made by check. signed by the treasurer. Amounts over $5. The related monthly general ledger summary entries shall carry the date of the month summarized. Fixed Asset Records and Transactions When acquisition costs exceed the capital budget authorization by 10 percent or more. Inventory issues shall be dated with the date of shipment.000 should always be capitalized unless unusual conditions point to proper expensing. dating the entries with the date of the remittance list. . I suggest that you only use him for “grunt work.” I’ve looked at the 8-K filed by Apollo and the auditors referenced in the 10-K. etc. she reports directly to the Audit Committee.org) under “Auditors Sharing Audit Programs” or get them from an old auditing textbook. CPAs. You can download copies of the audit programs from AuditNet (www. GA-2.auditnet. Apparently. so we can rely on her to be objective. Label the sections as follows: GA series (GA-1. You’ll need to come up with programs for the substantive audit procedures for each of the functional balance sheet areas (indicated with an asterisk (*) below).Date: 25 OCT 2011 06:42:35 +0000 From: "Darlene Wardlaw" <DW@aow. blah. Smith and Smith.S.” blah. I was only able to get you a spring intern (Bradley Crumpler) from Caledonia State University (heck. I only had to make a couple of changes before Arnold signed it.” Also. My preference is to place the audit programs at the beginning of each section. The bad news is that we don’t have access to prior year working papers. Because I am unsure of his training. I didn’t attach a copy because it didn’t say much. blah. He is the only unassigned person in the office right now. you are going to have to perform the bulk of the audit yourself. DW P. I didn’t even know they had an accounting program!). they appear to be top-notch. Arnold decided to accept the engagement anyway. I think we can rely on her work during our engagement. just something about “incongruent goals. I checked into the background and experience of Karina Ramirez. Keep your eyes open! The good news is that the predecessor auditors. I also went through her workpapers. Apollo’s Internal Auditor. . Thanks for drafting the engagement letter.) ICC series ICD series ICP series A series B series* C series* D series* E series* F series* I series* L series* N series* Q series* R series* X series* General and Administrative (Planning) Revenue/Collection Cycle Internal Control Evaluation Purchasing/Disbursements Internal Control Evaluation Payroll Internal Control Evaluation Trial Balance/Financial Statements/Adjustments/Footnotes Cash Substantive Workpapers Accounts Receivable Substantive Workpapers Inventory Substantive Workpapers Prepaids Substantive Workpapers Property. so you can use last year’s audited numbers from the 10-K.cpa> Subject: Upcoming Apollo Shoes Engagement Apollo denied our request to speak with the predecessor auditors because of “litigation concerns. have a good reputation. she was an auditor with a Big 4 firm for 8 years before coming to Apollo and has served on the state CPA society’s ethics committee. Against my advice. Lastly. Plant and Equipment Substantive Workpapers Other Assets Substantive Workpapers Current Liabilities Substantive Workpapers Notes Payable Substantive Workpapers Stockholders’ Equity Substantive Workpapers Revenue Substantive Workpapers Expenses Substantive Workpapers Because we are so understaffed during busy season. Sorry I haven’t made it out to Apollo yet. and once more last week.doc>><< AudComMins— 063007. DW .Date: 13 JAN 2012 12:45:39 +0000 From: "Darlene Wardlaw" <DW@aow.) behind your memo when you are done with them.doc>> Hope the inventory observation went well. I did meet with Jeff Chestnut (Apollo’s corporate secretary) who allowed me to copy the minutes of the Board of Directors. GA-3-2. Study these minutes – they provide a history of every important event and transaction that Apollo has undergone during the past year. January 1 through December 31. The board of directors met twice during the period under audit.doc>><< AudComMins—010308. Make notes in the form below for the audit working papers of matters relevant for the audit of the 2011 financial statements. I have attached copies. He said that he would e-mail it to you when it was completed. Prepare a working paper (GA-3) for my review with proper headings and these two columns: Information Relevant to 2010 Audit Audit Action Recommended You may want to stick a copy of the minutes in the workpapers (GA-3-1. I saw Bradley in the office working on some inventory stuff.cpa> Subject: Apollo Shoes minutes Attachments: << AudComMins—010307. etc. Theodore Horstmann. 2010 meeting were reviewed and approved.000 214.320. Lancaster’s plan to move production to within the company was discussed. and Fritz Brenner. incoming chairman of the board.000 451. 2011 and rolled into a note payable with the Twenty-First National Bank of Maine. and Mr. Karina Ramirez Treasurer. The board approved these salaries and stipends by a 6-1 vote: President and CEO. Mary Costain Controller. President and CEO of Far More Drugs. Fred Durkin VP Finance. Brenner moved a declaration of dividends for the year ended the previous December 31. officers’ salary increases of 10 percent for 2011 as well as stipends for outside Board Members of $90.000 1. the board authorized purchase of equipment totaling $1. Lancaster seconded. due January 1. 2012. Over Mr. Joe Bootwell VP Marketing. Harry R. Unum reported that the Company’s short-term line of credit was refinanced as of February 2.000 235.MEETING HELD JANUARY 5. Mr.3 million to facilitate internal production of Apollo products by a vote of 6-1. Daisy Gardner Internal Audit Director. they better increase by that much. VP and CFO.000 each. “Well. President of The Widget Corporation Mr.. Baker.000 649. Mr. Samuel Carboy $2. Mr. Professor of Accountancy and Typing at the Graduate School of Business and Clerical Skills. presided over the first meeting of the year. Eric Unum VP Legal Affairs. or heads will roll!” Mr. 2011 Larry Lancaster. Reporting on the annual meeting of shareholders. The meeting was conducted in the boardroom of Apollo’s new global headquarters. Executive Vice President and Treasurer of the Iguana Growers of America Inc. with costs of goods sold and general expenses bearing about the same relationships as experienced last year. Larry Lancaster Exec Sr.750. Ivan W.000 1. Unum moved.M. The minutes of the December 15. Lancaster stated.000 . Mandeville. Mr.000 222.000 1. Mr. All members were present: Larry Lancaster Josephine Mandeville** Ivan Gorr* Horstmann** Harry Baker* Fritz Brenner** Theodore Eric Unum * Outside director ** Outside director and member of the audit committee. Horstmann’s vehement disagreement. attached.100. Gorr. Minister of Commerce of Anglonesia. Lancaster welcomed the new or reelected board members: Josephine C. Sales are expected to increase 10 percent. Unum presented the forecast for the year. The motion died for lack of a second. beginning at 3 P. Sue Fultz VP Operations.650. AudComMins—010308. He noted that the cost of the commercial time rose approximately 10% from last year.000. Lancaster encouraged everyone to watch the 2011 Superbowl to watch for Apollo’s 15.M.second commercial.000. Meeting ended 5:30 P.Mr.doc /s/ Jeff Chesnut. Secretary . The cost of production and airing the ad is now approaching $1. 000. Damages amounted to approximately $50. the advance was approved unanimously. he would cash it and give it to his secretary. Lancaster asked Mr. The minutes of the January 5 meeting were reviewed and approved. the board authorized the write-off of one account receivable for $8.000. Unum further suggested that the promissory note plus accrued interest of 1% per year be due on June 30. 2048. Gorr concurred and mentioned something about “not sparing the rod. Mr. Mr. just under the insurance deductible. Mr. Mr. the Company has raised prices by about 10% with respect to product costs. In other business. Lancaster also stated that because of the strength of current product lines and as a cost-cutting measure. Unum to have the check drawn to him immediately at the conclusion of the board meeting.13 for an account that had been outstanding for over a year.000 to Mr. Lancaster noted that he did not anticipate any other write-offs during the year. or that “heads would roll!” Mr. parents were no longer willing to buy $300 premium shoes for their kids as they did in previous years. primarily because of parents’ growing disenchantment with spoiling their children. Lancaster’s personal secretary as a personal loan to cover personal legal expenses related to her previous employer. The Company has also saved postage and telephone expense through increased use of e-mail. Lancaster lamented that the quality of Apollo products was too high—the shoes were just not wearing out fast enough. 2011 Larry Lancaster. Mr. beginning at 3 P.” rather than “employee advances” so as to not trouble shareholders with needless details. All members were present: Larry Lancaster Josephine Mandeville** Ivan Gorr* Harry Baker* Fritz Brenner** Theodore Horstmann** Eric Unum * Outside director ** Outside director and member of the audit committee. chairman of the board. After general agreement among the board that similar options be made available to other board members in the future on an as needed basis. Mr. Unum moved that Apollo advance $1. Mr. Mr.M. presided over the second meeting of the year. Unum reported that sales revenues are not meeting expectations. The development lab will be modified in 2012 to house a personal gym for corporate executives. thereby eliminating Research and Development expense for the current year.810. Lancaster reported on damage caused by a “Nor’easter” storm that hit Shoetown in April. Lancaster suggested that it be recorded in “other receivables. Scientists working in the lab have been reassigned to maintenance duties elsewhere in the company. he decided to stop research and development efforts on the Phoneshoe.MEETING HELD JUNE 30. . Mr.” In order to compensate for decreased sales. The board unanimously supported Ernst Hathaway’s promotion from Director of MIS to VP-Information Systems. He reported on the plans for the purchase and installation of a new information system. The board authorized up to $1.2 million for the purchase of the new computer system. Ms. Mandeville offered to consult on the purchase and installation. To fund the purchase and pay other expenses, Mr. Unum requested that the board authorized a draw of $44,053,000 on the Company’s line of credit on July 1. This proposal was unanimously approved. Meeting ended 7:30 P.M. Secretary /s/ Jeff Chesnut, AudComMins—063002.doc MEETING HELD JANUARY 3, 2012 Larry Lancaster, chairman of the board, presided over the regular meeting, beginning at 2 P.M. All members were present: Larry Lancaster Josephine Mandeville** Ivan Gorr* Harry Baker* * Outside director committee. Fritz Brenner** Theodore Horstmann** EricUnum ** Outside director and member of the audit The minutes of the June 30 meeting were reviewed and approved. The selection by the audit committee of Anderson, Olds & Watershed as auditors was ratified. The $750,000 fee was approved for the 2011 audit. Ms. Mandeville moved, and Mr. Gorr seconded, a proposal to declare retroactively a cash dividend of $810,000 payable March 1 to stockholders of record on December 31. Approved by a vote of 5–2. Ms. Fultz, VP-Legal affairs, stated that on January 2, 2012 (yesterday), a class action suit alleging gross negligence and violation of warranty of merchantability was brought against Apollo for $12,000,000. The action stems from the use of one of the Company's products in an aquatic environment, which may have caused severe electrical shock to the wearer(s). She is working closely with Apollo’s legal counsel, Perley Stebbins, to vigorously defend Apollo’s good name. Ms.Fultz stated that the company’s current insurance does not cover these types of actions. Mr. Baker inquired as to the status of the machinery purchased in early 2010. Mr. Lancaster replied that the machinery would be set up “soon.” Mr. Lancaster moved and Mr. Unum seconded the approval of officers’ bonuses for the year just ended December 31. Approved by a 4–3 vote. President, Larry Lancaster VP Marketing, Fred Durkin VP Finance, Eric Unum VP Information Systems, Ernst Hathaway VP Legal Affairs, Sue Fultz VP Operations, Daisy Gardner $200,000 50,000 50,000 50,000 50,000 50,000 The Board approved the Company’s contribution to the Employee Benefits program. Mr. Unum stated that the contribution was increased by $300,000 for 2011, up 10% over the past several years to appease growing employee dissatisfaction. Given the company’s plans to automate the distribution process, Mr. Unum stated that employee benefits will decrease significantly in future years. Mr. Unum noted also that the company decided not to air a Superbowl ad this year. Meeting ended 8:30 P.M. AudComMins—010302.doc /s/ Jeff Chesnut, Secretary Date: 14 JAN 2012 08:49:35 +0000 From: "Darlene Wardlaw" <
[email protected]> Subject: Apollo Shoes Trial Balances Attachments: <<2010 Apollo Trial Balance.xls>>, <<2009 Apollo Trial Balance.xls>> I got a copy of Apollo’s 2011 year-end trial balance (attached) from Sam Carboy, Apollo’s Controller. I also got a copy of last year’s 2010 audited trial balance from Karina. I’ve attached copies of both to this e-mail and also posted them to the AOW intranet where you can also download them. I received it a week after he promised it to me, so apparently it wasn’t as clean a year-end close as he expected. I want you to put the numbers into three spreadsheets (one for the comparative (i.e., two-year) balance sheet (A-1), one for the comparative income statement (A-2), and one for the comparative statement of cash flows (A-3)). I know that everyone has a particular style of workpaper formatting, but my preference is for the following columns for the income statement and balance sheet: Acct # DW Acct Title W/P Ref Last year’s (Audited) Current Year (unaudited) Adjustments Dr. Cr. Current Year (Audited) 47 $1.633.044.221.27 $1.78 $128.00 $7.82 $117.00 $2.10 $164.815.39 $31.17 $133.000.633.023.012.000.44 $4.743.000.485.38 $200.01 $208.08 $13.00 $8.550.61 $4.21 $17.81 $141.217.314.71 Credit $1.00 $1.302.365.033.205.262.99 $853.20 $1.69 $583.28 $198.033.875.497.133.00 $2.989. Equipment.03 .942.899.404.318.238.04 $135.000.65 $246.212.24 $3. Depreciation Investments Other Noncurrent Assets Accounts Payable Sales Tax Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable FUTA Tax Payable State Payroll Taxes Payable SUTA Tax Payable FICA Employer Withholding Medicare Employer Withholding Line of Credit Current Portion Long-Term Debt Other Current Liabilities Notes Payable-Noncurrent Common Stock Paid-in Capital Retained Earnings Sales Sales Returns Warranty Expense Income from Investments Interest Income Cost of Goods Sold Freight Advertising Expense Auto Expenses Research and Development Depreciation Expense Warehouse Salaries Property Tax Expense Legal and Professional Expense Bad Debt Expense Insurance Expense Maintenance Expense Utilities Phone Postal Miscellaneous Office Expense Payroll Tax Exp Pension/Profit-Sharing Plan Ex Rent or Lease Expense Administrative Wages Expense Interest Expense Income Tax Expense .140.622.691.Spotlight Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Notes Receivable-Current Other Current Assets Land Buildings and Land Improvements Machinery.96 $1.98 $875.000.Federal Income Tax Expense .000.120.470.State Loss on Legal Settlement Debit $1.116.06 $3.13 $16.383.958.87 $16.00 $19.105.100.404.425.00 $623.000.99 $10.118.000.000.82 $80.569.318.000.603.825.987.642.305.605.00 $4.59 $4.52 $0.918.172.000.238.302.00 $283.88 $18.69 $583.905.281.00 $29.65 $61.48 $0.334.819.99 $6.00 $743.136. Inc Preclosing Trial Balance (Audited) 31-Dec-10 Account ID 10100 10200 10300 10400 11000 11500 12000 12300 14100 14200 14300 14400 14700 15000 15100 15200 17000 19000 19900 20000 23100 23200 23300 23350 23400 23500 23600 23700 23800 23900 24100 24200 24700 27000 39003 39004 39005 40000 41000 42000 45000 46000 50010 57500 60000 61000 62000 64000 64500 65000 66000 67000 68000 70000 70100 70110 70120 71000 72000 73000 74000 77500 78000 78500 78510 80000 Account Description Cash on Hand Regular Checking Account Payroll Checking Account Savings Account Accounts Receivable Allowance for Doubtful Accounts Inventory .00 $204.00 $7.92 $433.172.00 $429. Office Furniture Accum.000.00 $3.09 $0.32 $3.Apollo Shoes.406.495.32 $1.46 $897.000.000.410.03 $283.951.99 $76.000.583.974.840.01 $2.373.902.00 $612. 000.599.46 $2.00 $1.18 $52.82 $1.811.736.000.87 $137.64 $245.00 $8.270.23 $532.65 $11. Equipment.105.13 $610.39 $13.Preclosing Trial Balance December 31.780.000.000.275.527.224.91 $8.50 $10.106.00 $3.715.56 $84.220.922.095.929.197.502.670.92 Credit Amt $3.246.236.01 $214.414.00 $1.840.089.452.332.426.02 $77.00 $16.259.902.743.98 $1.80 $3.577.599.86 $8.15 $49.00 $130.000.00 $117.21 .99 $118.45 $36.915.00 $329.61 $24.263.414.213.313.891.881.44 $446.424.439.374.483.915.00 $2.591.009.Federal Income Tax Expense .780.00 $674.21 $329.128. Depreciation Investments Other Noncurrent Assets Accounts Payable Sales Tax Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable FUTA Tax Payable State Payroll Taxes Payable SUTA Tax Payable FICA Employer Withholding Medicare Employer Withholding Line of Credit Current Portion Long-Term Debt Other Current Liabilities Notes Payable-Noncurrent Common Stock Paid-in Capital Retained Earnings Sales – Spotlight Sales Returns Warranty Expense Income from Investments Interest Income Miscellaneous Income Cost of Goods Sold Freight Advertising Expense Auto Expenses Research and Development Depreciation Expense Warehouse Salaries Property Tax Expense Legal and Professional Expense Bad Debt Expense Insurance Expense Maintenance Expense Utilities Phone Postal Miscellaneous Office Expense Payroll Tax Exp Pension/Profit-Sharing Plan Ex Rent or Lease Expense Administrative Wages Expense Interest Expense Income Tax Expense .00 $4.88 $13.92 $2.953.000.00 $6.803.086.158.600.12 $55. 2011 Account ID 10100 10200 10300 10400 11000 11400 11500 12000 12300 14100 14200 14300 14400 14700 15000 15100 15200 17000 19000 19900 20000 23100 23200 23300 23350 23400 23500 23600 23700 23800 23900 24100 24200 24700 27000 39003 39004 39005 40000 41000 42000 45000 46000 47000 50010 57500 60000 61000 62000 64000 64500 65000 66000 67000 68000 70000 70100 70110 70120 71000 72000 73000 74000 77500 78000 78500 78510 Account Description Cash on Hand Regular Checking Account Payroll Checking Account Savings Account Accounts Receivable Other Receivables Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Notes Receivable-Current Other Current Assets Land Buildings and Land Improvements Machinery.00 $10.89 $1.75 $67.000.85 $3.000.09 $986.000.038.300.543.225.254.574.213.000.645.45 $1.31 $131.203.43 $2. Office Furniture Accum.47 $1.State Debit Amt $2.00 $7.50 $867.92 $49.145.000.439.00 $2.99 $44.332.000.106.125.59 $1.78 $8.000.000.000.65 $11.053.26 $4.000.870.953.097.540.502.000.854.720. cpa> Subject: Analytic Procedures 1. a. Include printouts of your calculations as support (GA-4-1.sec. Does anything jump out at you? c.Date: 15 JAN 2012 10:44:22 +0000 From: "Darlene Wardlaw" <DW@aow.) DW . I need you to perform preliminary analytical procedures on the financial statements. Assume the market value of the common stock is $24 million in both the current and prior years. Calculate financial ratios. but that too would be helpful. 2. GA-4-2. Calculate common-size financial statements and dollar amount and percent changes. I suggest you simply make a copy of your spreadsheet from your pro-forma financial statements that I asked you to prepare yesterday and remove the adjustment columns. compare Apollo’s numbers with those of its closest competitors. Have there been any significant changes that we need to examine closer? b. You can get those companies’ numbers from EDGAR (www. etc. Nike and Reebok. Write a brief memo (GA-4) highlighting what you believe are potential problem areas.gov). I am not sure if industry averages are available. If you have time. DW . Describe some common relationships and other considerations used by auditors when assessing the dollar amount considered material. Based upon your professional judgment and your discussion of items 1 and 2 above. In other words. determine an amount you consider to be a minimum material misstatement for Apollo Shoes and justify your recommendation in your memo. and total assets? 3. In the memo. Remember that the workpapers document that we are following Generally Accepted Auditing Standards. 2. what are some common measures of materiality with respect to income.cpa> Subject: Materiality for Apollo Shoes Engagement You need to prepare a memo (GA-5) addressing materiality for Apollo Shoes. sales. 1.Date: 15 JAN 2012 12:15:49 +0000 From: "Darlene Wardlaw" <DW@aow. Briefly describe independent auditors’ concept of materiality. likelihood of risk (what is the probability of fraud?). DW . significance of risk. such as assignment of personnel. Some things you might want to include in your memo: Have you noticed any “red flags” in either the minutes or your analytic procedures so far? Address fraud risk in general terms: types of risk (Remember that improper revenue recognition is always a “red flag. predictability of auditing procedures.cpa> Subject: SAS 99 Memo We need a memo (GA-6) addressing the potential for fraud for Apollo Shoes. and examination of journal entries and other adjustments We will need to get together with the entire audit team (you. me.”).Date: 16 JAN 2012 1:15:49 +0000 From: "Darlene Wardlaw" <DW@aow. pervasiveness of risk (is fraud risk centralized to one function or individual or is it throughout the organization?) How might a fraud be perpetrated and concealed in the entity Suggest ways that we might alter our audit approach to address the potential for fraud. and Bradley) for a “brainstorming” session next week. This workpaper is necessary to document that we are following SAS 99 fraud guidance. memos.Date: 16 JAN 2012 07:42:35 +0000 From: "Arnold Anderson" <AA@aow. Any suggestions as to how computers might be used on the Apollo Shoes engagement? For example. and Watershed (AOW) was aware of Apollo’s mid-year computer installation. I suggest you consider such things as the extent of computer usage. availability of data. organization structure of computer activities. the planned conversion was discussed and AOW was advised of the conversion process by the director of internal audit.cpa> Subject: Apollo Shoes and Computers Darlene mentioned your inquiry earlier this week. can correspondence. Anderson. and yes. complexity of computer operations. Olds. I am not too comfortable with computers but I am interested in how they can increase our firm’s profitability. “Uncle” Arnie . the more I am concerned about how the computer processing of the last two quarters’ transactions will affect our audit this year. our firm has recently obtained several laptop computers but we have not used them on any audit to date. computer-assisted audit techniques. and need for specialized skills. Also. I haven’t thought about it much. In fact. To be honest. so I appreciate you bringing it to my attention. The more I think about it. and auditing working papers be prepared and maintained on the computer? Could they save audit time as well as make the audit easier for me to supervise and review? Prepare a memo in the General and Administrative section of the current year workpapers (GA series) to document how planning might be affected by the computer processing of accounting transactions. The transactions are then posted to the ledgers by batches every night. the various databases. This Apollo message (including any attachments) contains confidential information intended for a specific individual and purpose. or the taking of any action based on it. Internal Audit Apollo Shoes. If you are not the intended recipient.doc>> I’m sorry I missed you when you stopped by earlier today. the transactions are not validated at entry to check for input errors. I’ve attached an excerpt from our workpapers that describes the system in more detail. Karina Karina Ramirez Director. Per your request. therefore. Inc. is strictly prohibited. .Date: 16 JAN 2012 10:07:15 +0000 From: "Karina Ramirez" <Kramirez@ApolloShoes. Accounting clerks directly enter accounting transactions from their terminals located in the various accounting departments.com> Subject: Upcoming Apollo Shoes Engagement Attachment: <<InfoSystemDocumentation. Validation occurs after the transactions are balanced by batch. (I insisted that Apollo start the accounting processing in this mode to establish control. To prevent errors from entering the financial records. thus. are only up-to-date as of the prior working day’s transactions. copying. you should delete this message and are hereby notified that any disclosure. Please let us know if there is any additional information that you require.) In addition. I will consider moving to online data entry and online input validation. As employees become more familiar with the terminal entry and control over transaction entry proves adequate. I hope this summary satisfies your needs. the transactions are not immediately posted to the various subsidiary ledgers maintained in the database. entry is online. or distribution of this message. Apollo Shoes is using a wireless local area network multiserver with a small information systems staff. such as inventory. However. and is protected by law. This small staff cannot support all of the ideal division of duties that would provide the proper separation auditors desire among computer personnel. I have tried to summarize the new information processing system: The computer accounting system is a combination of a simple batch computer system and an advanced computer system. Thus. The operations manager also is the person who works with vendor hardware service and maintenance personnel. The operations manager’s primary responsibilities are to ensure that the computer is operating properly and to direct the work of the two operators. and control clerk. A special input validation routine. and working with the vendor service representatives on software problems. However. This system utilizes a Storage Area Network (SAN) for database storage. The VP-IS works with the systems development manager and the various users to set priorities for the programmer/analysts. . Vice President of Information Systems (VP-IS). approving all equipment purchases. Two levels of security are provided in the system. He creates the specifications for projects after consultation with the users and assigns projects to the programmer/analysts. Systems Development Project Manager. or 10 trillion bytes) of storage capacity. allowed operations are isolated to the department that must enter and use the data. education of the programmer/analysts. an operations manager (who also serves as the librarian and control clerk). Included responsibilities include long-range planning. most of the controls and separation of duties previously described were retained. Network printers are located in each department. setting policy and procedures for information systems (IS) employees. The VP-IS also provides the primary contact with other department vice presidents and has overall responsibility for training other department personnel in the use of the new system. data review. This made the transition to the computer system easy on the employees. was promoted to vice president. Access to any function (data entry. Operations Manager. Apollo obtained a wireless local area network (LAN) multiserver soon after and began testing the hardware and software. the order entry accounting clerks cannot access the cash disbursement records or enter cash disbursement transactions without knowledge of the appropriate passwords. featuring 10 TB (terabyes. Following is a brief summary of the responsibilities and duties of each. every effort was made to keep as many as possible of the procedures and business documents used in the manual system. Other responsibilities include interface with the users on a one-toone basis to resolve their problems and consider their requests for modifications. and deferred posting. and preparing the department budget. thus. deferred validation. In this mode. As the new computer system was designed and customized to Apollo’s needs. Additional duties include system security. and two machine operators. The project manager is primarily responsible for all modifications to the financial accounting system and other systems development projects. Apollo converted to the wireless multiserver system. accounts receivable. Organization and Duties of Information Systems Personnel The information systems department consists of Ernst Hathaway—the Vice President of Information Systems. review invocation) for each unique set of transactions is controlled by another set of passwords. Accounting Software The financial accounting software is an integrated application combining a comprehensive set of general ledger. the data are not validated at the time of entry. and accounts payable functions. Batches are validated and posted every night. The VP-IS is responsible for computer processing operations. On October 1. The transfers of transactions from the Accounts Receivable and Accounts Payable modules to the General Ledger module also are done in batch mode.The information systems department became active in June. Ernst Hathaway. the detailed accounting records are never more than one day from being accurate. Hardware Description Apollo installed a wireless Local Area Network (LAN). For example. is employed after the batches are balanced. thus reducing training and employee objections to the computer. which reports all validation errors. database administrator. This system can support 400 client machines. a systems development project manager and two programmer/analysts. The erroneous entries can be corrected through maintenance functions. Apollo has elected to utilize batch entry. but Apollo currently uses about 20. file management system and redundancy. Further. The terminals require a special password. The financial accounting system allows online entry with online data validation and online posting. librarian. to provide better control. At that time the director. The testing of the new computer system progressed throughout the early fall with the accounting processing run on both the old manual system and the new computer system for the month of September. . See if you need to add any more strengths and/or weaknesses that you find from the ICQ and narrative descriptions of the revenue cycle. You may want to talk to Karina Ramirez to get answers to the questions. 1.cpa> Subject: Understanding the Revenue Cycle Attachment: <<RevenueICQ. DW . Complete the ICQ for Apollo. 2. For “yes” answers. For “no” answers. I’ve started a flowchart and listed some strengths and weaknesses.Date: 13 JAN 2012 7:42:53 +0000 From: "Darlene Wardlaw" <
[email protected]>> I’ve attached a Sales internal control questionnaire from another engagement that I think you can use for Apollo. add a comment stating which department and clerk performs the function. describe the possible “errors” or “frauds” that could occur because of the control weakness. but had to leave before I could finish it. cash sales. condition. Is the credit department independent of the sales department? 2. and freight allowances. Are pre-numbered bills of lading or other shipping documents prepared or completed in the shipping department? Completeness assertion: 5. Is the sequence checked for missing invoices? 7. Are returned sales credits and other credits supported by documentation as to receipt. extensions and footing. Are sales invoices checked for error in quantities. Is the shipping document numerical sequence checked for missing bills of lading numbers? Accuracy assertion: 8. Are sales prices and terms based on approved standards? 10. Are sales invoice blanks prenumbered? 6. and scrap sales. Does the accounting manual contain instructions for classifying sales? Cutoff objective: 16. Is access to sales invoice blanks restricted? 4. N/A Comments . Are all credit sales approved by the credit department prior to shipment? 9. COD sales. disposals of property.Internal Control Questionnaire—Sales Transaction Processing Assertions and Questions Occurrence assertion: 1. Does the accounting manual contain instructions to date sales invoices on the shipment date? Yes. No. and quantity. Are shipped quantities compared to invoice quantities? 12. Is there an overall check on arithmetic accuracy of period sales data by a statistical or product-line analysis? 14. Are periodic sales data reported directly to general ledger accounting independent of accounts receivable accounting? Classification objective: 15. Are sales of the following types controlled by the same procedures described below? Sales to employees. prices. and approved by a responsible officer? 11. 3. and checked with customers’ orders? 13. <<RevenueICQ.doc>> . . or the taking of any action based on it. We have not developed one for the purchasing cycle yet.com> Subject: Revenue and Collection Cycle Documentation I have excerpted from our workpapers a description of Apollo’s Accounting and Control Systems over the Revenue/Collection Cycle and Purchasing/Cash Disbursements. but we plan to do so once your audit is ended and our assistance is no longer necessary. you should delete this message and are hereby notified that any disclosure. I’ve also gave a copy of a flowchart of sales transaction processing to Darlene. Internal Audit Apollo Shoes. and is protected by law. Karina Karina Ramirez Director. is strictly prohibited. or distribution of this message. Inc. Hope you find the info useful. This Apollo message (including any attachments) contains confidential information intended for a specific individual and purpose.Date: 13 JAN 2012 13:02:47 +0000 From: "Karina Ramirez" <Kramirez@ApolloShoes. Let me know if you have any questions. copying. If you are not the intended recipient. The salesclerks prepare an estimate of the dollar amount of the order and write it on the form. signing each one and asking the counter customers to sign in person. who is in the treasurer’s department. the date. the credit manager signs the sales order. and the product unit prices from an approved price list. The sales orders are then hand-carried to the credit manager. and sheets in the numerical sequence are removed only for billing clerks’ immediate loading onto the computer printer. The sales order forms are kept in the salesclerks’ working area through which many people pass during the day. the money is taken by the cashier. Officers and employees have described accounting and control procedures informally under the heading of several transaction cycles. when customers pay cash over the counter. with the invoice amount being charged to an account receivable set up for the customer. The billing clerks produce a four-copy sales invoice on a prenumbered invoice form. although the manual has not been kept up to date. For bookkeeping convenience. delivery charges. Credit Approval and Sales Processing Customer orders are received in the mail. over the telephone. and the sales order is held until notification of payment is received from the cashier. The sales invoice forms are kept in a locked closet in the billing department. customer address. If credit is approved. they insert the customer and product information from the customer order.Apollo Accounting and Control Systems: Revenue and Collection Cycle As evident in the company organization chart. . Using a screen facsimile on a personal computer. the customer is asked to pay in advance. these “cash” sales are treated the same as credit sales. The clerks prepare written sales orders for telephone and counter customers. The credit manager checks the customers’ accounts receivable balances and other credit file information using a computer-based inquiry system. a customer number (assigned immediately for new customers). and control. If credit is not approved. The sales order is stamped “paid” and sent to the billing department. identification of products. and the invoice total are computed and put on the invoice. The sales order documents used in the offices are not prenumbered. accounting. Likewise. and the sales order is stamped “paid” and sent to the billing department. Sales taxes. Their descriptions of the company's current revenue cycle activities appear below. The company also has an abbreviated accounting and control manual. The sales orders contain the customer name. the sales orders are sent to the billing department in the controller’s office. or a payment received. After credit has been approved. Apollo has several departments and offices concerned with management. and the quantity ordered. and the customer’s payment being applied immediately to the same account. and over the counter by salesclerks in the marketing department. When customers are on the premises. which serves as the authorization to move goods to the shipping area. Copy 1 of the bill of lading is attached to the shipment. Copy 4 is sent to the shipping area with the products. awaiting matching with copy 4 of the invoice. the customer order. they can pick up their own orders at the shipping area.Copy 1 and copy 2 of the sales invoice. the handlers are supposed to alter the invoice copies to show the correct quantity. where it serves as the source of entries to reduce the perpetual inventory records. Copy 3 is sent to the inventory records department in the controller’s office. the inventory storeskeeper supervises removal of shoe products from shelves and bins. Copy 3 of the invoice is sent to the shipping department. and the sales order are sent to the accounts receivable accounting department. where they are asked to sign copy 4 as acknowledgment of receipt. which was first sent to the inventory stores department as authority for the storeskeeper to put the order together and move it to the shipping department. These documents are held in invoice numerical order in a “pending shipment” file. a prenumbered bill of lading is filled out in two copies for shipments by contract truckers. They check both copy 3 and copy 4 for the correct quantity of each product. If any items shown on the invoice are not shipped. then pack the order in suitable boxes. shipping employees remove copy 3 from the “pending release” file. which is also in the controller’s office. In the shipping area. Shipment and Delivery Upon receipt of an invoice copy 4. Copy 2 of the bill of lading is sent with invoice copy 4 to the accounts receivable accounting department. . Otherwise. where it is initially held in a “pending release” file. Apollo Revenue Cycle Flowchart . When the Purchase Department receives the purchase requisition. five copies of a pre-numbered purchase order are prepared. To further assure that the items received are counted. The blacked-out purchase order helps to ensure accurate counting of the items ordered. a disbursement voucher is prepared and is sent to the cashier and the voucher package is sent to the Finance Department. the cashier will review. When the goods are received. Copy 1 and the goods received are sent to the department that requested the items. the purchase order. Once the manual process is complete. The copy is then attached to the canceled voucher package and canceled disbursement voucher and filed as paid. the inventory file is updated to reflect the goods received and three copies of a pre-numbered receiving report are prepared. The VP of Finance cancels the voucher package and sends it to A/P. Then they count and inspect the items received. where both source documents are filed by number together. When payment is due. sign and cancel the disbursement voucher and prepare a check. their copy is modified so that the quantity of the items ordered is blacked-out. Copy 3 of the receiving report is sent to A/P where it. Copy 2 is sent back to the department who prepared the purchase requisition. Copy 5 is retained in the purchasing department and filed with the accompanying purchase requisition. where it is matched and filed with the accompanying canceled voucher package. Copy 1 of the purchase order is sent to the selected vendor. they search the approved vendor list and consult the listed prices for the goods desired for each vendor. where it is filed with the accompanying purchase requisition and purchase order. sends Copy 1 to the Purchasing Department and Copy 3 to Accounts Payable.Apollo Accounting and Control Systems: Purchasing and Expenditure Cycle The employee prepares a purchase requisition and has a supervisor approve it. A journal entry is recorded to show the payment of the payable. However. Upon receipt of the disbursement voucher. and the purchase requisition are compared to the vendor’s invoice for accuracy. Copy 4 is sent to Accounts Payable. . The Receiving department verifies the order by comparing the external packing slip with the internal purchase order. This allows the potential for taking any vendor discounts offered. The Receiving Department files Copy 2 of the receiving report with the packing slip and their copy of the purchase order. The supervisor retains Copy 2 of the pre-numbered purchase requisition for the department. the invoice is sent to Accounts Payable and the packing slip is retained in Receiving. The VP of Finance will sign the check after reviewing it with the voucher package for consistency and accuracy. The canceled disbursement voucher is sent to A/P from the cashier. Copy 3 is sent to the Receiving Department. The voucher package is then filed according to payment date. Once a vendor has been selected. The VP of Finance sends a copy of each signed check to A/P. the receiving clerk is required to sign the receiving report. 3. I need you to prepare a bridge working paper (ICC-1) for the audit of Apollo Shoes as of December 31. The objectives of his work will be to (1) obtain control evidence about the validity. and (2) obtain control evidence about the accuracy and classification of sales postings to individual customer accounts receivable. In the first column. detect. describe specifically how (recalculation. If the control activity is not in place. we can use customer confirmations to test the validity of the transactions if we can’t rely on the client’s controls. In the second column. Finally.. describe the audit implications of the strengths/ weaknesses related to the control activities with respect to transactions or accounts reported in the financial statements (e.Date: 14 JAN 2012 08:13:24 +0000 From: "Darlene Wardlaw" <DW@aow. addressing this issue. Understand that Apollo may or may not have the control activity in place. In the fourth column. use an index number (S-# or W-#) cross-referenced to your flowchart to indicate potential strength or weakness. and therefore ultimately increase bad debt expense).) you would test the control. DW . authorization. we may test the control if that is cost-effective. inquiry and observation. specifically the identification of potential for fraud (and errors for that matter) in the revenue cycle. or correct errors or frauds. 5. or the control activity is in place but not effective. If they don’t. If we don’t find any problems. etc. 2011.e. 2. we need to determine what audit procedure (i. a compensating test) we could use to catch them. If they do. This is what I need you to do: 1. 4.) I suggest that you get Bradley to audit a sample of sales transactions for compliance with these control procedures. and proper period recording of recorded sales. we can propose the control as a management letter comment. accuracy. the presence of a credit check ensures that sales are only made to creditworthy customers. a lack of a credit check would allow sales to customers unable to pay. describe the control activity (or lack thereof) that may serve to prevent..g.cpa> Subject: Revenue Cycle Bridge Working Paper We need to make sure that we address the fraud auditing standard (SAS 99) in the workpapers. reperformance. maybe we won’t have to send out as many positive confirmations. add a fifth column for compensating audit procedures. In the third column. (For example. just write the memo to be placed in the accounts receivable workpapers (C-series) about the problems that Bradley found and their affect on our audit procedures (more extensive testing. Errors in billing customers generally might be expected to be a mixture of overcharges and undercharges to the customers. Also. DW . June. and December. Normally. 5. The company reports financial results each calendar quarter ending in March. if not all. 2. Sales transactions with missing bills of lading suggest improperly recorded sales.) Based on what Bradley found. since there is a relatively small amount of sales transactions during the year. Apollo Shoes faced financial problems in the fourth quarter of the year. I don’t think we can rely on Apollo’s controls over revenue and accounts receivable. If the control performance were uniform for the year. For now. We will need to confirm most. what was the average delay between the invoice date and the date a credit memo was entered giving the customer credit to correct the mistake? 9. rather than me. I suggest that you mail positive confirmations to those customers with accounts greater than $1.cpa> Subject: FW: Revenue Cycle Problems Bradley sent me a copy of his test of controls work that he did on sales transactions.000. Lack of credit approval for sales generally suggests the company might experience collection problems.000. You need to write a memo identifying and explaining the significance of the qualitative features indicated by these deviations. For customer overcharges.Date: 17 JAN 2012 11:04:37 +0000 From: "Darlene Wardlaw" <DW@aow. September. Can you find any qualitative characteristics not signaled by these indicators? Because of the problems noted. December is the month when deviations overstating sales can have the most effect on the financial statements. I’ll talk to you about it more later.000. you wouldn’t do this because it is difficult for the customers to confirm a year’s worth of transactions. they should be able to confirm without a problem. etc. However. positive confirmations. 4. 6. I don’t think you need to worry about customers with current zero balances. Some things you may want to think about: 1.).000 and negative confirmations to those with balances less than $1. the deviations would be evenly distributed by month. I suggest that you ask Apollo’s customers to verify total sales during the year. there looks to be some serious problems in Sales and A/R. 3. (Please tell him to send his work to you. 7. 8. of the accounts receivable balances. cpa> Subject: Test of Controls Attachment: <<Revenue Cycle Test of Controls.” I have attached a list. “No credit approval” means that the expected credit approval notation could not be found in the documents. “Arithmetic error” means I found the invoice multiplied and added to show an incorrect total.169. I found purchase orders from each customer except for the December shipment to Mall-Warts. 12.145. 7. All credit memos generate debits to a sales returns account and credits to accounts receivable. I randomly chose the sample of 180 transactions across the year with 15 from each calendar month. Because there was no purchase order. When “Wrong quantity billed” appears. These were the procedures that I used: 1. The cost of the inventory shipped was $3. “Missing BL”means the bill of lading (shipping document) could not be found.10. and each was posted to the right customer’s individual account. 9. 3.xls>> Of the 180 sales transactions you asked me to look at. . I found all the invoices in the sample. 5. . 10. 11. I looked at the sales and shipping documents. or comparisons. recalculations. a description of the effect follows. All the invoices were properly posted to the general ledger sales and accounts receivable control accounts. The invoices not listed had no deviations related to other documents. “Paid in full on time” means the customer paid the invoice when it was due. “CM (date)” means the customer notified Apollo of an error and a credit memo was issued on the subsequent date. 4. 8. “Wrong price” means the clerks put the wrong unit price on the invoice and billed the customer incorrectly. 2. 6.Date: 17 JAN 2012 10:32:16 +0000 From: "Bradley Crumpler" <TheCrumpler@Aow. I found 51 “deviations. None were missing. 501 Run For Your Life No credit approval.336 Paul Bunion Dec. 12 Nov.582 Wall of Shoes No credit approval. 13 Feb. Revenue Cycle Test of Controls For Year Ended 12/31/2011 Deviation Sample # 1 21 8 Invoice 3991 Month Day AmountCustomer $35. Aug. 4189 28 29 180 186 8 3 3916 . 4. 31. 31.029 Nuke Me No credit approval.029 Nuke Me No credit approval. CM Sept. Overcharge $200. Unpaid as of Dec. Paid in full on time. Apr.000.574 Mall-Warts Apr. Paid in full on time. 4072 22 23 137 143 5 0 3916 3913 24 25 148 161 0 8 3848 $4. No CM.051.029 Nuke Me $1. Overcharge $180. 10 $2. CM Sept. Unpaid as of Dec. 10. 20. 5. 4161 4 5 51 52 2 6 4205 $730.478.246 Imelda's Closet No credit approval.029 Nuke Me Prepared by Reviewed by ICC B Deviation Sep. 31. Inc. Dec. Overcharge $250. Sep. Paid in full on time. 3 Sep.588 Shoe Shack Wrong quantity. 4 Oct.165. CM Sept. Aug.458.239 Wild Hair Shoes Wrong price. CM Nov. 30. CM Nov.296 Mall-Warts $35. CM Sept.000 Blue Bird Shoes Wrong price.450 Pump It Up Shoes Missing BL. Overcharge $2.300 Intnl Soccer Federation Wrong price.Apollo Shoes. 31 $65.900 Pump It Up Shoes Arithmetic error.333.258 Eight East No credit approval.492. 17 $524. 18 $112.239 Walkabout Wrong price. CM Aug. 3376 8 9 67 72 2 4 4000 $1. 31.079 Nuke Me Wrong price. 3848 26 27 161 166 8 6 Wrong price. 15. 23 Wrong quantity. Paid in full on time. Unpaid as of Dec. 19 $35. July 27 $62. Paid in full on time. 27 $13. CM Nov.029 Nuke Me Dec. (Ne 4134 30 31 190 191 1 9 3866 3596 32 33 193 225 9 9 3943 . Paid in full in Jan. 8 Mar. Unpa 4081 6 7 61 66 2 4 3968 $3. 1. Overcharge $50. 18 $2.002 Evil Spirt Wrong price. 22 Nov.275 Mall-Warts No credit approval.446 Lockup Shoe Store No credit approval. Overcharge $15. Paid in full on time. 11 $92. Overcharge $100. Overcharge $50. CM Aug. 4 $3. Dec.755 Neutralizer $139.029 Nuke Me Arithmetic error. Paid in full 60 days. July 19 3935 2 3 37 50 7 9 3566 No credit approval. Aug. 3881 Aug. CM Dec. 24 $22. CM Jan. 4206 20 21 132 133 5 7 3321 $35. Wrong quantity.119 Mall-Warts No credit approval. Aug. No credit approval. 19 $110. No credit approval. Missing BL. Overcharge $50. 29 $2. 3964 12 13 91 104 0 6 3903 4132 14 15 109 112 6 3 3911 4175 16 17 116 121 4 0 3343 No credit approval. 21 Sep. Unpaid as of Dec. Paid in full in Jan. Overcharge $8. Aug. 28 $11. 5. No credit approval. Paid in full on time.030. CM Sept. 16 $10. Paid in full on time. Aug.376 Pump It Up Shoes No credit approval. Overcharge $1389. Wrong price. 4. Paid in full on time. 31. Aug. 1. 15. 11 $2.100.332 Blue Bird Shoes No credit approval. Overcharge $220. 31 Dec.239 Tread No credit approval. 14 $35. Unpaid as of Dec. 5 $35. Paid in full on time. 17 June 14 $35. 30 $146. Dec. Overcharge $700. 4025 10 11 86 89 6 3 3423 $9. 27 $45. Paid in full on time. 27 Oct. 4177 18 19 123 125 4 6 3752 $3.392 Custom Shoes No credit approval. Unpaid as of Dec.447. 28 Nov.848 Paul Bunion Feb.649 Doug's Feb.326. Unpaid a 31. 4 Oct. Apr. Paid in full on time. 4130 41 42 245 252 6 2 3858 No credit approval. 3948 37 38 234 238 5 5 4042 $35. Overcharge $35. Oct.082 Sassy Shoes No credit approval. Aug. 22.447. 6. CM.249 Blue Bird Shoes No credit approval. 31 Aug. 3227 39 40 240 242 0 8 3749 $2. 14 $4. Sep. Aug. Paid in full on time. 3874 49 50 291 292 0 6 4197 $139.259 Company B No credit approval.923 Mall-Warts No credit approval.246 Pump It Up Shoes No credit approval. 31.666 Sassy Shoes 4068 51 296 6 . Overcharge $500. 26 $63. 1 Dec.259 PayMore Shoes July 23 $5. Paid in full on time. Paid in full on time. Paid in full on time. 1 $750. 8 $63. No credit approval. CM. Overcharge $25. 1 $329.029 Nuke Me No credit approval. No credit approval.765. Paid in full on time.029 Nuke Me No credit approval. Aug. 28 $5. No purchase order. Sep. Paid in full on time. 22 No credit approval. Unpaid as of Dec. Overcharge $100. Aug. CM Aug.792 Blue Bird Shoes Missing BL. 28 $5. 16 Jan.257. 3611 May 1 $1.326 Sassy Shoes No credit approval.000 Intl Soccer Federation Wrong price. CM Aug. 31.765. Unpaid as of Dec. Aug.082 Mall-Warts Wrong price.829 Mall-Warts $250. Unpaid as of Dec.34 228 1 3819 July 6 $357. Paid in full on time. Paid in full on time. 31. Paid in full on time.374 Trenchfoot Wrong price. 1 $35.242 Blue Bird Shoes No credit approval. 3819 35 36 228 232 1 1 Wrong price. Aug.069 Evil Spirt $6. 6 June 13 Nov. 3905 43 44 259 265 7 8 3957 3510 45 46 268 269 0 3 3877 3874 47 48 280 289 4 6 3943 $35. 10. e. In the fourth column. or the control activity is in place but not effective. a compensating test) we could use to catch them. use an index number (S-# or W-#) to indicate potential strength or weakness. I don’t think that Apollo has enough purchase transactions that we need to rely on the controls (in other words.Date: 15 JAN 2012 00:35:24 +0000 From: "Darlene Wardlaw" <DW@aow. In the first column. reperformance.. 2.g. Not required. but could be helpful. If they do. In the second column. or correct errors or frauds. 2011. we need to determine what audit procedure (i. describe the audit implications of the strengths/ weaknesses related to the control activities with respect to transactions or accounts reported in the financial statements (e. If you have time. If they don’t. 4. detect. you may want to prepare a purchasing cycle flowchart. the presence of a properly completed purchase order check ensures that purchases are authorized). inquiry and observation. Welcome to “Busy Season!” Similar to what you did with the Revenue Cycle. etc. listing the major errors that could occur in the purchasing system and to describe the test of controls procedures for auditing related purchasing controls to determine whether reliable control exists. I want you to prepare a bridge working paper for the audit of Apollo Shoes as of December 31.. If the control activity is not in place. In the third column. 3. (For example. describe the control activity (or lack thereof) that may serve to prevent. Understand that Apollo may or may not have the control activity in place. we can propose the control as a management letter comment. we may test the control if that is cost-effective. 5. we’ll look at them all).cpa> Subject: Purchasing Cycle Bridge Working Paper I am glad that you don’t mind working on Saturdays.) DW . describe how specifically how (recalculation.) you would test the control. but we need to document our finding for our 404 work: 1. we can use customer confirmations to test the validity of the transactions if we can’t rely on the client’s controls. add a fifth column for compensating audit procedures. Finally. . If I remember correctly. 2. I would prefer that you audit cash rather than Bradley (let him stick to vouching documents to keep him out of trouble). You may want to take a closer look. I left it in your mailbox at work. Talk to you soon. The last check written in December was check number 3621. 3. There was an adjustment made at the end of the year to other income that looks odd. DW . there was a transaction in investments for the same amount.cpa> Subject: Audit of Cash We received the bank confirmation and bank cutoff statement this morning. They use duplicate checks so I was able to look at the carbons when I was out at Apollo on Saturday. A couple of points: 1. Don’t forget to trace from the cutoff bank statement to the outstanding check list to make sure that the listing is complete.Date: 17 JAN 2012 15:37:42 +0000 From: "Darlene Wardlaw" <DW@aow. Although we have not conducted a comprehensive. Twenty First National Bank Post Office Box 1 Shoetown. At the close of business on the date listed above.M. balances are intentionally left blank if they are not available at the time this form is prepared. regarding our deposit and loan balances. INTEREST RATE BALANCE* General Cash Account 604-17-526-5 n/a 3. if during the process of completing this confirmation additional information about other deposit and loan accounts we may have with you comes to your attention. NY 10108-1003 .053. We were directly liable to the financial institution for loans at the close of business on the date listed above as follows: ACCOUNT NO. ME 00002 * Ordinarily.O.2% 3.03 Payroll Account 604-29-016-3 n/a 0 Savings Account 604-03-739-8 3.75% 11/30/2011 Inventory E.599. detailed search of your records.Order Department. Rich (Financial Institution Authorized Signature) 1/14/2012 (Date) No exceptions noted.670.000. please include such information below.P Unum 1/9/2012 (Date) (Customer's Authorized Signature The information presented above by the customer is in agreement with our records. ME 00002 1. P. and Bank Administration Institute. If the balances have been left blank. Acct#7500438 BALANCE* 10. Additional forms available from: AICPA .192. Please use the enclosed envelope to return the form directly to our accountants. I. no other deposit or loan accounts have come to our attention except as noted below. Please confirm the accuracy of the information.STANDARD FORM TO CONFIRM ACCOUNT BALANCE INFORMATION WITH FINANCIAL INSTITUTIONS Apollo Shoes. our records indicated the following deposit balance(s): ACCOUNT NAME ACCOUNT NO. Please return this form directly to our accountants: Andersen. and Watershed.284. American Institute of Certified Public Accounts. 000 DATE DUE 1/1/201 2 2012 INTEREST RATE DATE THROUGH WHICH INTEREST IS PAID DESCRIPTION OF COLLATERAL 8. 000 44. Box 1003 NY. noting any exceptions to the information provided. Olds.* Although we do not request nor expect you to conduct a comprehensive.75% 11/30/2011 Inventory 9. please complete this form by furnishing the balance in the appropriate space below. Approved 1990 by American Bankers Association.15 2. Inc CUSTOMER NAME FINANCIAL INSTITUTION'S NAME AND ADDRESS We have provided to our accountants the following information as of the close of business on 12/31/2011. LLP 32nd Financial Avenue Shoetown./ DESCRIPTION Note#106316 Line of Credit. detailed search of our records. 15 501.61 12.369.15 6.55 5.960.717.03 29.073.533.122.192.73 7.21 2.746.44 12.009.587.285.90 5.79 18.16 2.87 1.19 4.004.85 5.421.98 . 100 Shoe Plaza Shoetown.500.00 15.07 16.841.807.365.566.394.91 Amount 1/13/2012 23.11 29.794.32 9.684.205.000.49 988.472.80 7.96 6.146.841. Inc.597.00 12.90 3 Deposits 2 Transfers from other accounts Deductions 55 Checks 3 Transfers to other accounts Your Current Balance CYC 01 MC 01 11.40 17.Account 604-17-526-5 Page 1 of 2 Apollo Shoes.45 6.610.181.77 14.08 12.816.606.05 Amount 10.54 Check 3590 3603 3604 3606 3583 3584 3588 3592 3594 3595 3601 3605 3607 3608 3609 3613 Date 1/7/2012 1/7/2012 1/7/2012 1/7/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 1/10/2012 Checks and Other Withdrawals Check 3586 3587 3582 3591 3598 3597 3599 3602 3615 3612 3593 3610 3617 3619 3585 3589 Date 1/3/2012 1/3/2012 1/3/2012 1/4/2012 1/4/2012 1/5/2012 1/5/2012 1/5/2012 1/5/2012 1/5/2012 1/6/2012 1/6/2012 1/6/2012 1/6/2012 1/6/2012 1/6/2012 Amount 8.741.27 14.62 FREQ M0000 Deposits and Other Additions Date Amount 1/3/2012 1/5/2012 Date 440.515.375.667.07 9.929.27 7.766.904.194.954.707.54 15.843.00 4.30 480.022.12 4.284.741. ME 00001 *** Your Checking Acount 1-1-2012 THRU 1-15-2012 *** Your Previous Balance Additions 3.37 823.20 2.006.782. . 12 1/14/2012 8.09 1/13/2012 6.00 1/13/2012 585.500.266.434.419.889.20 Account 604-03-739-8 604-03-739-8 604-29-016-3 Transfers from Other Accounts Date Amount 1/10/20112 3.46 13.566.02 14.377.000.19 1/14/2012 4.117.025.300.000.19 10.338.13 124.924.937.Account 604-17-526-5 Page 2 of 2 Checks and Other Withdrawals Check Date 3621 3596 3600 3611 3616 3614 3618 3620 3622 3623 3625 3626 Amount 1/10/2012 1/12/2012 1/12/202 1/12/2012 1/12/2012 1/12/2012 1/12/2012 1/12/2012 1/13/2012 1/13/2012 1/13/2012 1/13/20112 11.000.500.16 1/13/2012 6.81 15.00 1/14/20112 565369.891.994.000.00 1.00 1/13/20112 22.93 2.09 1/14/2012 1.000.216.69 1/14/2012 8.43 1/13/2012 927.88 Transfers to Other Accounts Date Amount 1/7/2012 6.00 Account 604-03-739-8 604-03-739-8 3627 3628 3629 3633 3635 3636 3624 3630 3631 3632 3634 Check Date Amount 1/13/2012 6.137.85 9.174.366.96 1/13/2012 5.30 6.94 200.14 2.00 1/14/20112 8.014.868.683.000.99 .28 1/14/2012 6. Let us know if you have any questions. specifically copies of two bank deposit slips from early January that you requested for your accounts receivable work. Inc. According to your instructions. we’ve marked them PBC for “Prepared by Client. I’ve also left some other documents that you requested last Friday. Internal Audit Apollo Shoes. Karina Karina Ramirez Director.com> Subject: PBC Schedules We’ve completed the schedules that we agreed to prepare in our audit planning meeting.Date: 10 JAN 2012 13:02:47 +0000 From: "Karina Ramirez" <Kramirez@ApolloShoes. I’ve left them on your worktable in the conference room. .” I’ve attached copies to this e-mail as well as posted them to your firm’s intranet site as you directed. 987.205.275.52 $532.958.23 $198.061.30 .93 $4.00 $3.00 $0.13 $3.245.15 $3.000.28 $2.Apollo Shoes.670.116.125.92 $0.599. Inc.044. B-1 Prepared by Reviewed by Cash Lead Schedule For Year Ended 12/31/2011 PBC 10100 Account Title Cash on Hand 10200 Regular Checking Account 10300 Payroll Checking Account 10400 Savings Account Acct # (Audited) Unaudited Balance Balance 12/31/2010 12/31/2011 $1. 782.56 532.80* Adjustment to 532.Apollo Shoes Bank Reconciliation 12/31/2011 General Account Unadjusted book balance Bank Adjustments Amount to Balance Adjusted book balance Balance per bank statement Add Deposits in transit Deduct O/S Checks Adjustment to Balance Adjusted bank balance 51.341.59 0.03 440.59 -598.192.00 480.00 0.284.92 Payroll Account Unadjusted book balance Bank adjustments 0.00 .12 0.341.92balance posted to Cash and Controller's Clearing Account 3.192.125.375.750.125.00 Adjusted book balance 0.45 -3.00 Balance per bank statement Add Deposits in transit Deduct O/S Checks Adjusted bank balance 0.848.00 598. 00 9.137.56 .32 9.05 10.684.122.55 10.667.606.44 16.07 2.61 14. Inc Outstanding Checks 31-Dec-11 PBC Check # 3583 3584 3585 3586 3587 3588 3589 3590 3591 3592 3593 3594 3595 3596 3597 3598 3599 3600 3601 3602 3603 3604 3605 3606 3607 3608 3609 3610 3611 3612 3613 3614 3615 3616 3617 3618 3619 3620 3621 Total Date 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 12/31/2011 Amount 9.741.746.85 4.394.960.794.366.717.37 823.90 12.79 17.14 7.707.07 5.98 14.501.000.02 1.587.194.192.566.073.515.00 12.94 15.85 6.338.30 14.46 12.15 8.27 2.741.40 5.87 1.766.27 7.08 18.21 2.96 200.77 7.566.533.266.904.807.014.816.929.15 1.19 6.16 4.006.Apollo Shoes.00 5.841.73 13.54 15.30 11.377.49 988.848.205.610.472.12 4.421.19 3. 33 $2.13 $11.452.606.258.011.25 $96.00 $104.765.503.000.004.23 $5.146.588.22 $385.75 $5.60 $793.26 $399.63 $3.31 $252.450.053.23 $400.009.21 $1.59 $730.25 $85.253.Apollo Shoes. Inc Bank Deposit Slip Twenty First National Bank.534.954.55 $695.542.458.82 $6.648.241.56 $932.769.844. 2012 Customer Name Run For Your Life Shoes Hip Hop Shoes International Soccer Federation Walk About Doug's Shoes Custom Shoes Blue Bird Shoes Pump It Up Shoes Hop Scotch Shoes Sassy Shoes Evil Spirit Shoes Action Foot Shoes Paul Bunion Footware Shack's Shoe Shine Lock-Up Shoe Store Total Deposit Check Number 13289 14675 10531 13695 17097 14659 11500 11186 15820 19785 15759 10716 19851 523 16514 Check Amount $2.653.54 .996.285.847.544.36 $23.22 $10.081.165.85 $86.58 $3.85 $35.375.54 $895. Inc Bank Deposit Slip Twenty First National Bank. 2012 Customer Name Check Number Pay More Shoes Nuke Me Shoe Shack Trenchfoot Imelda's Closet Eight East Feet Lamour Neutralizer Bad Boy Shoes Wild Hair Shoes Big Bob's Shoe Store Total Deposit 16625 16949 17309 18544 11618 18369 15299 18608 12818 12085 14819 Check Amount $526.11 $45.02 $3. Account #604-17-526-5 January 6.500.91 Apollo Shoes. Account #604-17-526-5 January 13.359.028.222.144. . You can get these off of any early January deposits slips. 2.Date: 28 JAN 2012 15:37:42 +0000 From: "Darlene Wardlaw" <DW@aow. allowance for doubtful accounts as a % of total receivables) to develop your estimate of what should be in the allowance. you need to prepare a memo (C-2-1) addressing the following issues: 1. look at subsequent cash collections.cpa> Subject: Audit of Accounts Receivable We received a number of account receivable (and one pre-paid insurance) confirmations that I put on your desk when I stopped by to talk to Samuel Carboy this morning. While I think of it. you can probably start working on A/R now. Describe the two forms of accounts receivable confirmation requests that you used and indicate the factors that you considered in determining which type to use. but the allowance goes down? I need a separate workpaper (C-3) addressing the reasonableness of Apollo’s Allowance for Doubtful Accounts. A/R goes up. Lastly. You can specifically identify troubled accounts. What “alternative procedures” are you going to use to verify the existence of these accounts and the gross value of the receivables if the customers who receive positive confirmations never reply. etc. even to a second request? Put the confirmations in the workpapers (C-2-2. the allowance for doubtful accounts looks pretty low. It would also be helpful to indicate the payments received by Apollo on the Aged Trial Balance Schedule (C-2). C-2-4. DW . Also consider current and previous A/R Turnover and Days’ Sales in A/R ratios. look at what Apollo’s competitors do. With the good response rate on the positive confirmations. be sure to tie the totals into deposits indicated on the cutoff bank statement received directly from the bank. If you get copies from the client. C-2-3.). Address any discrepancies between the client and the customer and propose adjustments as necessary. look at what Apollo has done in the past (bad debt expense as a % of sales. Accounts Receivable Lead Schedule For Year Ended 12/31/2011 C-1 Prepared by Reviewed by PBC (Audited) Balance 12/31/2010 $16.000.874.00 ($1.526.613.00 $1.59 $49.23 .819.148.00 $8.88) $0.99 $198.00 $0.75) $15.00 $0.99 $198.064.254.259.250.613.98 $0.72 $49.810.231.082.00 $0.00 $0.000.235. Inc.243.Apollo Shoes.83 $232.410.780.231.902.009.000.262.000.13 ($1.00 $1.71 11100Advances to Employees 11400Other Receivables Acct # Account Title 11000Accounts Receivable 11500Allowance for Doubtful Accounts Additions Credits/ Receipts/ Writeoffs Unaudited Balance 12/31/2011 $231.00 $0. 388.458.92 $3.005.119.152.85 $252.582.755.564.908.77 $96.063.25 $4.165.503.081.23 $400.730.812.82 $10.458.33 ($1.542.503.25 $85.847.23 $575.04 $2.779.68 Received .165.847.144.22 $63.900.041.011.091.205.765.22 $399.11 $695.23 $5.60 $3.375.27 $271.11 $695.286.074.93 $14.004.258. Accounts Receivable Aged Trial Balance For Year Ended 12/31/2011 2011 Pay More Shoes Nuke Me Run For Your Life Shoes Shoe Shack Tread Mall-Wart Wall of Shoes Trenchfoot Shack's Shoe Shine Imelda's Closet Hip Hop Shoes International Soccer Federation Eight East Company B Feet Lamour Walk About Neutralizer Doug's Shoes Custom Shoes Blue Bird Shoes Bad Boy Shoes Pump It Up Shoes Hop Scotch Shoes Sassy Shoes Wild Hair Shoes Evil Spirit Shoes Action Foot Shoes Big Bob's Shoe Store Paul Bunion Footware Lock-Up Shoe Store Other Customers Total Net Sales $586.500.54 $895.75 $20.158.996.25 $1.542.258.826.779.75) $2.22 $399.03 $2.225.388.13 $11.668.606.59 $2.499.844.00 $3.48 $2.004.765.178.015.534.31 $3.982.151.819.222.542.359.231.388.21 $2.017.02 $932.582.375.011.899.60 $793.29 $8.769.402.63 $3.Apollo Shoes.780.48 $3.632.21 $3.241.36 $0.21 $1.588.90 $3. Inc.55 $730.903.25 $4.588.45 $231.500.63 $1.648.081.95 $695.653.013.534.253.173.952.090.25 $85.59 $2.051.613.028.00 $49.99 Conf Date C-2 Prepared by Reviewed by Date Total Balance Type Mailed Received $526.259.77 $96.228.784.046.54 $1.952.585.765.56 $45.54 $895.31 $3.21 $1.053.88 $9.03 $9.85 $1.15 $435.65 $385.450.774.081.847.58 $104.33 $3.82 $10.342.23 $5.211.63 $400.105.755.09 $3.270.60 $3.55 $730.561.144.60 $793.65 $385.399.544.25 $1.691.55 $3.75 $5.549.13 $11.359.779.619.56 $29.315.85 $6.109.93 $3.450.24 $86.544.028.75 $5.98 Current <30 Days Past Due 30-60 Days $526.452.813.253.222.85 $35.74 $122.844.847.58 $104.02 $932.85 $252.52 $4.85 $454.648.606.531.051.08 $15.304.522.85 60-90 Days 2012 Payments >90 Days $35.258.241.36 $23.75 $5.258.24 $86.325.74 $2.22 $63.653.26 $497.211.56 $45.165.14 $1.55 $3.996.452.017.942.15 $1.85 $14.769.500. 2011.755. ME Neutralizer 1359 Central Boulevard Derma.053. Anderson.48 This balance is correct except as noted below: Our records indicate that we owe $1388. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. MS 39530 Attn: Accounts Payable Dept.23 for 10 pallets of shoes.755.051. Samuel Carboy ______________________ Samuel Carboy. Part of this audit includes direct verification of customer balances. are making their regular audit of our financial statements. Your prompt attention to this request will be appreciated. Our auditors.75 more than indicated above. and Watershed.Apollo Shoes. is $3. Please do not send your remittance to our auditors. Shoetown.48 Purchases from Apollo Shoes during the year 2011 totaled $3. We wrote a check to Apollo on 12/28 for $3.144. Controller The balance due Apollo Shoes as of December 31.051. Date: 1/20/2012 By: __Rudy Robinson______________________ Title: _Accounts Payable ______________ . Olds. Inc. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. We don’t know why they shipped us so many pairs in late December (including over 1600 pairs of size 23’s that we can’t even give away!)! We didn’t order them and we can’t afford to send them back! Date: 1/14/2012 By: __Action Jackson____________ Title: _Liquidation Coordinator______ . This is not a request for payment. ME Mall-Warts 146 Boardwalk Drive Atlantic City. Shoetown. Part of this audit includes direct verification of customer balances. Our auditors.158. are making their regular audit of our financial statements. 2011. but we entered into involuntary bankruptcy on November 3. We told Apollo about this back at that time.225. Samuel Carboy ______________________ Samuel Carboy.549. Your prompt attention to this request will be appreciated.88 Purchases from Apollo Shoes during the year 2011 totaled $122. Olds. and Watershed. NJ 08401 Attn: Accounts Payable Dept. Please do not send your remittance to our auditors.Apollo Shoes. Anderson.60 These amounts are correct except as noted below: The amounts appear right. Controller The balance due Apollo Shoes as of December 31.826. is $20. Inc. Date: 1/14/2012 By: __Justin Thompson_____________________ Title: _Accounts Payable Coordinator___________ .165. Part of this audit includes direct verification of customer balances. Please do not send your remittance to our auditors.Apollo Shoes.500. 2011. Samuel Carboy ______________________ Samuel Carboy. Shoetown. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. ME Run for Your Life Shoes Attn: Accounts Payable Dept.55 This balance is correct except as noted below: Yes. Your prompt attention to this request will be appreciated. This is not a request for payment. CA 90035 Our auditors.500.55 Purchases from Apollo Shoes during the year 2011 totaled $2. 5110 Speedway Drive Los Angeles. are making their regular audit of our financial statements. is $2. Olds. Controller The balance due Apollo Shoes as of December 31. but we paid the entire amount on 1/8. we made one purchase from Apollo during the year. Inc.165. Anderson. and Watershed. Tread Shoes___ . NO REPLY IS NECESSARY.091. Your prompt attention to this request will be appreciated. IN 47432 Our auditors. Part of this audit includes direct verification of customer balances. IF THE INFORMATION IS CORRECT.Apollo Shoes. Please do not send your remittance to our auditors. Total purchases agree with our records though. This is not a request for payment. Anderson. Date: __1/14/2012 By: __Shoeless Joe Johanson____ Title: _President. Olds.388. Samuel Carboy ______________________ Samuel Carboy.017. and Watershed. ME Tread Attn: Accounts Payable Dept. are making their regular audit of our financial statements. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND COMPARE THEM TO YOUR RECORDS OF YOUR ACCOUNT WITH US. PLEASE STATE ANY DIFFERENCES BELOW AND RETURN DIRECTLY TO OUR AUDITORS IN THE RETURN ENVELOPE PROVIDED. Inc. Controller The balance due Apollo Shoes as of December 31.75 Purchases from Apollo Shoes during the year 2011 totaled $3. is $1.74 This balance is correct except as noted below: We were told in November that our account had already been credited for the amount listed above for a return of 5 pairs of defective shoes. IF THE INFORMATION IS NOT IN AGREEMENT WITH YOUR RECORDS. Highway 67 French Lick. 2011. Shoetown. Lone Mountain Trail P.Apollo Shoes.O. Date: 1/21/2012 By: __Kevin Bunion_______________________ Title: _VP-Finance.58 Purchases from Apollo Shoes during the year 2011 totaled $29. Anderson.458. Part of this audit includes direct verification of customer balances. PBS ______________ . Please do not send your remittance to our auditors. Samuel Carboy ______________________ Samuel Carboy.63 This balance is correct except as noted below: No problems noted. ME Paul Bunion Footwear Attn: Accounts Payable Dept.632.847. 2011. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. Inc. Your prompt attention to this request will be appreciated. Olds. Shoetown. MT 59717 Our auditors. is $10. are making their regular audit of our financial statements. and Watershed. Controller The balance due Apollo Shoes as of December 31. This is not a request for payment. Box 10558 Big Sky.270. Apollo Shoes, Inc. Shoetown, ME Sassy Shoes Attn: Accounts Payable Dept. 440 W. 53rd Street New York, NY 10018 Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2011, is $5,765,081.85 Purchases from Apollo Shoes during the year 2011 totaled $15,178,041.85 This balance is correct except as noted below: Yes, we owed it. This is the third letter that we’ve received from you people!!! Our sales are just running a little slowly this year, but we paid on the tenth, so quit hassling us! Date: __1/22/2012_______________ By: __Sassy Spinelli______________ Title: _Founder, Sassy Shoes_______ Apollo Shoes, Inc. Shoetown, ME International Soccer Federation Attn: Accounts Payable Dept. Birmingham Road Stratford-upon-Avon Warwickshire CV34 6LT England Our auditors, Anderson, Olds, and Watershed, are making their regular audit of our financial statements. Part of this audit includes direct verification of customer balances. PLEASE EXAMINE THE DATA BELOW CAREFULLY AND EITHER CONFIRM ITS ACCURACY OR REPORT ANY DIFFERENCES DIRECTLY TO OUR AUDITORS USING THE ENCLOSED REPLY ENVELOPE. This is not a request for payment. Please do not send your remittance to our auditors. Your prompt attention to this request will be appreciated. Samuel Carboy ______________________ Samuel Carboy, Controller The balance due Apollo Shoes as of December 31, 2011, is $1,222,359.56 Purchases from Apollo Shoes during the year 2011 totaled $3,228,779.92 This balance is correct except as noted below: The amounts are correct as stated. I don’t think we are going to buy any more though. The sirens keep going off prematurely and it’s causing our fans to riot. Date: 1/21/2012 By: __Foots McKinney____________________ Title: _Equipment Manager, ISF _____________ the reserve has been decreased by reducing the reserve and Cost of Goods Sold. I thought he sent you a copy already. As the quantity of odd sizes gradually decreases. In addition to writing an inventory observation memo. Finally.” I mean that the inventory cost should already be in the general ledger balance shown in the trial balance. the adjustment is to cost of goods sold. tie the Inventory Status Report into the Inventory Lead Schedule.Date: 2 FEB 2012 10:24:53 +0000 From: "Darlene Wardlaw" <DW@aow. My conversation with Samuel Carboy indicated that they received a huge number of oddsized shoes from their principal supplier last year against which the previous auditors made them set up a reserve. Apollo generally turns over its entire inventory several times a year. The Reserve for Inventory Obsolescence decreased significantly from last year. judgmentally sample a number of unit costs from recent invoices and tie them to the Inventory Status Report. By “included. tie the Inventory Warehouse Report to Apollo’s Inventory Status Report supplied by Karina last week. you will need to tie in Bradley’s test counts on the client’s count sheets to Apollo’s Inventory Warehouse Report. tie the lead schedule into the Trial Balance. When the inventory is adjusted to match the physical count. but I don’t doubt that he didn’t. I’ve attached an inventory memo that I received from Bradley. He indicated that. . with the exception of the odd-sized shoes. Lastly. I don’t think he knows what an inventory observation memo is – you’ll have to write the memo based upon Bradley’s observation notes and what you observed when you were there on December 31. Next. Be careful to determine the proper accounts for adjustment when inventory is included or excluded from the physical count.cpa> Subject: Inventory For inventory. If the numbers agree. he just started laughing. the in-charge didn’t want me to let the Apollo people know what I was recounting! I found some pallets of shoes stacked near the back of the warehouse (furthest from the shipping dock). “FOB Destination.” I attached a copy of the purchase invoice as well as the ones from the previous two purchases.” I also spent 4 hours watching them count the supply closet. For some reason. women’s and children’s shoes.889. They were covered with dust and looked very old. The invoice shows the shipment was made from the Anglonesia Rehabilitation and Reprogramming Institute on December 26.cpa> Subject: Apollo Shoes Inventory Observation While the “in-charge” was drinking coffee and scarfing down doughnuts with Karina. I’m going home. Boy. Each pallet included all the same sizes of men’s. I observed a count tag on every pallet. These were the only shipments received in the last several months. There were a total of 98 count sheets. (I’ve attached a copy to put in the workpapers.Date: 30 DEC 2011 4:43:52 +0000 To: “Darlene Wardlaw” <dw@aow. He said that they shipped out “a boatload of them (size 23’s) last week. They were men’s size 23. including a shipment of shoes costing $8. were they upset about that! Apollo personnel counted all inventory.09 that was received on December 31. I had them open up a number of boxes throughout the warehouse to make sure that shoes were in each of them. There were no differences between my test counts and those counted by the client.) Shoe boxes were stacked in pallets. All the pencils were accounted for. When I asked the inventory foreman about them and whether they had any value.434. According to the in-charge’s instructions. Each pallet was six boxes wide by six boxes deep and stacked 30 boxes high (6X6X30=1080 boxes/pallet). I recounted all the items on seven count sheets (attached).cpa> From: "Bradley Crumpler" <TheCrumpler@Aow. He said that’s why the “reserve for inventory obesity” was so high. . I was out in the warehouse counting! This is what I observed: I saw the Apollo manager (Andrew Jacobs) giving instructions to the count teams. 6. 2. place an inventory count tag on the bin to mark it as having been counted. write in the bin number. The inventory clerk will enter the counts into the computer system. and then submit them to the inventory clerk for processing. identify the item located in it and the count of that item. and the count in the open space at the bottom of your count sheet. After a team finishes its counts. run a variance report. After receiving the count sheets(s). the inventory manager will review and sign them. and then submit them to the inventory clerk for final entry. There will be NO sales and NO movement of inventory during the count. 7. each count team member should write his/her name in the "Count Team" line on each count sheet and the team should then turn in the sheets to the inventory manager. who will review and sign them. The inventory manager will assign recounts for variances to the count teams. 5. Each team will then recount the assigned bins and initial beside the recount on the count sheet. 4. consisting of a counter and a writer. 9. and submit the variance report to the inventory manager. 3. Counts will be performed in teams of two. . The recounts will be resubmitted to the inventory manager. 8.Apollo Shoes Inventory Count Instructions 1. For each bin. If more than one item is in the bin. After counting a bin. the additional item description. 81 COUNT TEAM R. Jacobs Pallet Location Sku# ` Style Type Quantity Counted Size C46 30180Spotlight Men's 23 1080 C47 30180Spotlight Men's 23 1080 C48 30180Spotlight Men's 23 74 . 2011 SHEET NO. Q. Harrington REVIEWED BY A. Thomas.INVENTORY COUNT SHEET December 31. Greene ENTERED BY B. Morris.APOLLO SHOES. COUNT TEAM J.R.5 1080 A68 10200Siren Women's 6. Peters ENTERED BY G.5 680 .5 1080 A67 10200Siren Women's 6. Jacobs Pallet Location Sku# 20 ` Style Type Quantity Counted Size A65 10200Siren Women's 6.5 1080 A66 10200Siren Women's 6. INVENTORY COUNT SHEET December 31.5 1080 A69 10200Siren Women's 6. Samuels REVIEWED BY A. T. INC. 2011 SHEET NO. 5 1080 B31 20040Speaker Men's 7. Meadow s REVIEWED BY A.5 1080 B33 20040Speaker Men's 7. COUNT TEAM S.5 1080 B26 20040Speaker Men's 7.5 217 .5 1080 B28 20040Speaker Men's 7. 2011 SHEET NO.5 1080 B27 20040Speaker Men's 7.5 1080 B32 20040Speaker Men's 7. INC. Jacobs Pallet Location Sku# 37 ` Style Type Quantity Counted Size B25 20040Speaker Men's 7.5 1080 B37 20040Speaker Men's 7.APOLLO SHOES. Adams.5 1080 B29 20040Speaker Men's 7.5 1080 B34 20040Speaker Men's 7. H.5 1080 B38 20040Speaker Men's 7. INVENTORY COUNT SHEET December 31. Frey ENTERED BY E.5 1080 B36 20040Speaker Men's 7.5 1080 B30 20040Speaker Men's 7.5 1080 B35 20040Speaker Men's 7. . L. Jacobs Pallet Location Sku# 56 ` Style Type Quantity Counted Size B213 20220Speaker Women's 8 1080 B214 20220Speaker Women's 8 1080 B215 20220Speaker Women's 8 1080 B216 20220Speaker Women's 8 1080 B217 20220Speaker Women's 8 1080 B218 20220Speaker Women's 8 1080 B219 20220Speaker Women's 8 1080 B220 20220Speaker Women's 8 1080 B221 20220Speaker Women's 8 1080 B222 20220Speaker Women's 8 1080 B223 20220Speaker Women's 8 1080 B224 20220Speaker Women's 8 1080 B225 20220Speaker Women's 8 1080 B226 20220Speaker Women's 8 586 .APOLLO SHOES. Landry. Johnston REVIEWED BY A. COUNT TEAM K. INVENTORY COUNT SHEET December 31. Robertson ENTERED BY N. 2011 SHEET NO. INC. Greene ENTERED BY B. 2011 SHEET NO.APOLLO SHOES. INVENTORY COUNT SHEET December 31. Q. COUNT TEAM R. Harrington REVIEWED BY A. INC. Thomas. Jacobs Pallet Location Sku# 64 ` Style Type Quantity Counted Size C1 30010Spotlight Men's 6 1080 C2 30010Spotlight Men's 6 1080 C3 30010Spotlight Men's 6 1080 C4 30010Spotlight Men's 6 36 . Harrington REVIEWED BY A. COUNT TEAM R. Jacobs Pallet Location Sku# 96 ` Style Type Quantity Counted Size C102 30330Spotlight Women's 12 1080 C103 30330Spotlight Women's 12 1080 C104 30330Spotlight Women's 12 1080 C105 30330Spotlight Women's 12 90 .APOLLO SHOES. Greene ENTERED BY B. INC. Q. 2011 SHEET NO. INVENTORY COUNT SHEET December 31. Thomas. R. Peters ENTERED BY G. Samuels REVIEWED BY A. 2011 SHEET NO. T. Morris.APOLLO SHOES. INC. INVENTORY COUNT SHEET December 31. COUNT TEAM J. Jacobs Pallet Location Sku# 3 ` Style Type Quantity Counted Size A10 10030Siren Men's 8 1080 A11 10030Siren Men's 8 1080 A12 10030Siren Men's 8 1080 A13 10030Siren Men's 8 890 . 000.50 $0.52 12300Reserve for Inventory Obsolescence ($3.967.00 ($2.26 $66.825.Apollo Shoes.246.967.52 $128.101.645.000.813.000.205. Inventory Lead Schedule For Year Ended 12/31/2011 D-1 Prepared by Reviewed by PBC Acct # Account Title (Audited) Balance 12/31/2010 Purchases/ Additions 12000Inventory $18.00) Cost of Goods Sold Unaudited Balance 12/31/2011 $130. Inc.26 $67.205.24 $178.145.845.527.00) ($867.645.012.424.845.00) $15.527.557.24 $178.50 . 32 12 1/2 581 138.16 8 926 138.08 609 139.96 4.44 11 1/2 756 138.487.76 639.224.76 570.022.52 4.098.08 41.08 58.952.287.72 10 1/2 510 138.022.56 6 995 138.08 106.96 823 139.76 4.08 125.48 9 1/2 839 138.08 117.76 648.40 11 631 138.195.76 49.002 139.08 101.141.069.52 5 1/2 849 138.08 70.40 3.582.56 8 1/2 820 138.Apollo Shoes.08 113.08 70.219.424 139.76 104.76 103.225.08 104.12 3.934.132.20 13 631 138.76 559.781 139. Inc Inventory Status Report Post Physical Inventory Count December 31.006.68 22.08 12 701 138.60 4.08 129.76 606.208.12 2.688.044.80 8 1/2 718 138.08 89.08 135.225.287.76 247.32 4.673 139.68 352 139.318.60 11 539 138.491 139.76 807.422.631 13.800.56 4.644 139.720.72 8 660 138.794.046.80 1.698.849.88 4.56 7 1/2 980 138.128.632 139.12 5.84 12 1/2 737 138.72 3.08 44.44 5.388.007 138.48 2.486.80 4.364.76 289.08 139.56 4.76 577.260.96 14 324 138.76 638.76 370.515.962.282.572 139.440 3.76 255.40 10 1/2 912 138.08 75.08 4.08 68.76 664.389.115.128.04 6 1/2 614 138.40 11 1/2 513 138.122.08 74. 2011 Sku# Style 10010Siren 10020Siren 10030Siren 10040Siren 10050Siren 10060Siren 10070Siren 10080Siren 10090Siren 10100Siren 10110Siren 10120Siren 10130Siren 10140Siren 10150Siren 10160Siren 10170Siren 10180Siren 10190Siren 10200Siren 10210Siren 10220Siren 10230Siren 10240Siren 10250Siren 10260Siren 10270Siren 10280Siren 10290Siren 10300Siren 10310Siren 10320Siren 10330Siren Type Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Inventory.018.081.650 139.341.000 139.715 139.76 338.781.04 9 529 138.12 9 1/2 1.76 509.08 87.337 139.640 139.628.08 968 139.08 127.08 99.76 85.585 139.129 139.76 57.76 135.902.84 746 139.113.44 4.76 91.08 73.52 7 1/2 544 138.072 139.562.438.613.285.20 94.242.08 87.08 84.420 139.764.48 13 301 138.079 139.08 74.139.774 139.862.840 139. 12/31/2011 Size Quantity Unit Price Ext Price Quantity Unit Price Ext Price 7 507 138.60 2.56 .48 1.76 360.24 13 1/2 423 138.08 115.928.76 487.76 640. 12/31/2010 Inventory.48 1.92 2.425.08 14 1/2 496 138.92 408 139.08 91.92 2.799.319.76 199.130 139.40 10 997 138.581 139.08 137.08 96.578.76 239.835.52 5 538 138.573 139.08 137.76 676.827 139.737.76 115.48 10 649 138.665.608.04 658 139.045.08 80.00 7 768 138.48 740 139.08 70.229.00 9 936 138.420.24 12 509 138.407.756 139.76 373.04 1.08 70.76 507.76 698.76 577.982. 764 116.71 263.055 230.07 427.36 14.99 12.40 1.55 8 2.019 230.07 517.083 116.637.40 8 1/2 1.000.41 14.14 11.74 13.248 230.630.71 1.414.06 13.209.070.07 291.07 294.715.391.07 356.316.07 242.71 1.890 116.413 116.606.548 230.620 116.764.574.69 12 1/2 1.589.07 493.284.40 8.720.041 230.570.71 1.60 5 736 230.905 116.399 230.998.518.71 380.86 7.71 1.420 230.778 230.664.71 1.949.197.681.16 .730.410.470.07 260.71 1.664.662.739.580 230. 12/31/2010 Inventory.273 116.360 116.551.07 346.498.645.858 230.21 41.325.07 211.256 116.141.586.71 322.71 122.71 974.678.934.682.232.07 363.07 114.652.38 10 1/2 1.313.602.36 12.663 230.52 11 1.20 7 1/2 1.07 239.74 2.257 116.663. 12/31/2011 Size Quantity Unit Price Ext Price Quantity Unit Price Ext Price 6 498 230.21 7 1.40 9.230.720 230.796.71 1.60 15.162 116.569 116.71 1.975 116.85 2.037 230.448.058.71 1.051 116.60 11 1/2 1.260 116.146 230.89 14.17 3.757 230.239 116.70 11 1/2 1.25 5 1/2 1.72 10 2.123 116.Sku# Style Type 20010Speaker Men's 20020Speaker Men's 20030Speaker Men's 20040Speaker Men's 20050Speaker Men's 20060Speaker Men's 20070Speaker Men's 20080Speaker Men's 20090Speaker Men's 20100Speaker Men's 20110Speaker Men's 20120Speaker Men's 20130Speaker Men's 20140Speaker Men's 20150Speaker Men's 20160Speaker Women's 20170Speaker Women's 20180Speaker Women's 20190Speaker Women's 20200Speaker Women's 20210Speaker Women's 20220Speaker Women's 20230Speaker Women's 20240Speaker Women's 20250Speaker Women's 20260Speaker Women's 20270Speaker Women's 20280Speaker Women's 20290Speaker Women's Inventory.707.867.589.837.504.07 257.478.71 1.583.93 286.07 169.194.206.76 11 1.36 14.647.07 261.71 158.46 15.346.037.596 33.230.90 7 1.540 116.70 7 1/2 1.07 455.502.71 831.33 6 1/2 920 230.07 517.36 6 1/2 1.007.93 12.07 351.070.833.71 977.07 326.562.11 1.626 116.064.441.59 13.71 1.397.197.170 116.507 230.36 9 1.07 234.07 382.723.176.07 468.47 8 1.07 404.71 369.07 299.782.260 116.800.351 116.22 10.52 11.71 261.99 6 1.982 230.49 14.248 230.599 9.251.116 116.71 1.87 3.71 1.331.170 116.33 9.116 116.425 116.511.699.71 1.93 10 1.07 321.71 1.59 14.40 8.590.02 12 1.232 116.012 116.137 230.07 395.60 10 1/2 1.71 1.527 230.267 230.07 409.75 9 1/2 2.46 8 1/2 2.44 13 673 230.120 230.71 1.378 116.131 230.71 1.07 154.725.302 230.282 230.619.83 9 1.69 2.148.510.71 1.23 9 1/2 1. 046 203.27 840.50 96.276 205.297.50 146.515.27 632.916.039.195.00 3.475.27 270.509.947.00 4.942.00 4.00 3.47 11 1/2 808 203.27 653.50 83.079 205.00 1.50 54.198.472.50 105.32 9 1/2 1.27 641.518 205.27 192.27 921.27 425.489 205.585.50 175.10 12 1/2 472 203.27 115.27 481.27 516.692.779 205.869.485.69 8 624 203.320 205.750.912.361 205.234 197.118.026.86 7 1/2 776 203.547.330 205.00 3.127 205.784.50 188.00 3.156.304 205.457.37 7 1/2 1.854.154.00 1.27 772.394 203.179.032.27 848.808.68 5 1/2 518 203.028 203.91 11 1.00 4.071 205.50 253. 12/31/2011 Size Quantity Unit Price Ext Price Quantity Unit Price Ext Price 6 898 203.518 205.20 6 722 203.586.16 759.00 2.40 23 3.50 89.50 209.114.27 885.50 135.08 12 442 203.270 205.00 3.176 20.538.549.27 672.310 203.531 205.00 3.00 565 205.244 203.279.47 9 1/2 774 203.33 8 1/2 924 203.161 205.531.028. 12/31/2010 Inventory.588.50 72.00 2.861.50 153.024 203.27 645.748.16 440.824.884 205.945.599.679.063 205.86 12 1/2 170 203.27 654.028.879.316 205.743.52 6 1/2 752 203.00 3.44 5 520 203.762 205.464.64 101.50 157.984.147 205.00 3.00 2.00 939 205.346 205.07 10 1/2 1.20 9 980 203.50 144.00 4.134 205.27 386.50 200.052.633 205.188 203.50 212.00 2.01 30.27 771.50 283.27 311.901 205.185 205.00 3.14 7 666 203.00 2.92 6 1/2 842 203.682.773.17 11 928 203.50 199.50 266.27 8 1.78 .89 8 1/2 864 203.00 1.90 15 354 203.27 689.50 110.107 205.64 2.347.034.00 3.50 262.50 132.50 80.00 2.03 9 1.00 2.563.50 182.815.977.927.18 10 1.50 164.187 205.00 4.00 2.74 10 1/2 652 203.225.50 171.760 205.430.00 2.50 208.00 3.384.006.455.00 1.595.00 4.27 540.50 126.50 241.27 1.29 11 1/2 986 203.53 14 394 203.49 10 710 203.50 34.50 105.27 472.785.27 775.50 188.27 525.27 542.413.27 724.428.984.491.372 6.27 260.Sku# Style 30010Spotlight 30020Spotlight 30030Spotlight 30040Spotlight 30050Spotlight 30060Spotlight 30070Spotlight 30080Spotlight 30090Spotlight 30100Spotlight 30110Spotlight 30120Spotlight 30130Spotlight 30140Spotlight 30150Spotlight 30160Spotlight 30170Spotlight 30180Spotlight 30190Spotlight 30200Spotlight 30210Spotlight 30220Spotlight 30230Spotlight 30240Spotlight 30250Spotlight 30260Spotlight 30270Spotlight 30280Spotlight 30290Spotlight 30300Spotlight 30310Spotlight 30320Spotlight 30330Spotlight 30340Spotlight 30350Spotlight Type Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Inventory.290 203.00 3.27 443.27 683.096 205.27 940.854 197.651.641 205.267.956.758.27 423.582 205.715.50 157.848.33 12 542 203.00 3.95 13 408 203.42 7 1.560 205.728.820.27 637.55 13 268 203. 76 139.71 116.685.744.423.32 437.627.76 139.987.59 1.222.435.5 Women's Siren Size 11 Women's Siren Size 11.5 Men's Siren Size 13 Men's Siren Size 13.76 139.60 174.5 Men's Speaker Size 7 Men's Speaker Size 7.40 267.80 423.76 139.20 448.44 388.52 292.68 32.32 713.76 139.76 139.197.062.852.76 139.5 Women's Siren Size 5 Women's Siren Size 5.022.5 Men's Siren Size 10 Men's Siren Size 10.71 116.71 116.71 116.335.721.71 Total 284.925.76 139.08 .84 51.72 100.76 277.51 586.781 2275 989 408 698 693 929 520 3841 4681 5021 7592 6116 17363 17.00 138.5 Men's Siren Size 11 Men's Siren Size 11.5 Men's Siren Size 12 Men's Siren Size 12.5 Women's Siren Size 12 Women's Siren Size 12.76 116.76 139.76 139.76 139.279.04 707.703.76 139.053.289 4908 4.954.96 341.169.675.08 97.76 139.128 5419 2.026. ME 00001 Quantity Unit Price 2034 2571 2446 4.168.71 116.76 139.359.76 139.5 Men's Siren Size 9 Men's Siren Size 9.853.76 139.5 Men's Speaker Size 9 Men's Speaker Size 9. Freight paid by Shipper 2/10.459.430.40 398.5 Women's Siren Size 9 Women's Siren Size 9.012.985 1835 1247 720 393 234 365 1915 2.5 Women's Siren Size 10 Women's Siren Size 10.20 54.76 139.84 359.640.748 139.68 129.029 11064 14.454.942.322.68 395.60 256. GH327MQ Date VIA: Terms: 8/13/2011 Cargo.280.5 Men's Siren Size 14 Men's Siren Size 14.5 Women's Siren Size 7 Women's Siren Size 7.76 139.91 886.52 360.56 317.71 116.5 Women's Siren Size 8 Women's Siren Size 8.44 1.76 139.672.76 139.5 Men's Speaker Size 10 Ship To: Apollo Shoes One Shoe Place Shoetown.800.239.271.64 57.11 546.580.28 757.5 Women's Siren Size 13 Men's Speaker Size 6 Men's Speaker Size 6.48 96.36 2.319.76 139.76 139.064 3976 1.04 72.24 339.56 713.96 599.76 139.5 Men's Siren Size 8 Men's Siren Size 8.176. ME 00001 Item # Description MS1001GX MS1002GX MS1003GX MS1004GX MS1005GX MS1006GX MS1007GX MS1008GX MS1009GX MS1010GX MS1011GX MS1012GX MS1013GX MS1014GX MS1015GX MS1016GX WS1017GX WS1018GX WS1019GX WS1020GX WS1021GX WS1022GX WS1023GX WS1024GX WS1025GX WS1026GX WS1027GX WS1028GX WS1029GX WS1030GX WS1031GX WS1032GX WS1033GX MS2001MX MS2002MX MS2003MX MS2004MX MS2005MX MS2006MX MS2007MX MS2008MX MS2009MX Page 2 of 2 Men's Siren Size 7 Men's Siren Size 7.76 139. net 30.76 139.73 1.64 685.76 139.76 139.283.64 555.849 2427 2580 3027 2093 2832 3.76 139.76 139.76 139.08 682.71 116.000.5 Men's Speaker Size 8 Men's Speaker Size 8.881 5104 5.76 139.INVOICE No 1004345 Page 1 of 2 Anglonesia Rehabilitation and Reprogramming Institute 31XPZ Chancellor Anglonesia.517.798.76 139. FOB Destination Bill To: Apollo Shoes One Shoe Place Shoetown.291.552.71 116.837.5 Women's Siren Size 6 Women's Siren Size 6. 5 Men's Spotlight Size 12 Men's Spotlight Size 12.169.27 205.70 279.870.367.784.52 520.27 205.71 205.27 205.27 205.47 306.56 185.079.27 205.5 Men's Spotlight Size 10 Men's Spotlight Size 10.013.33 634.208.72 251.428 904 284 488 661 1494 1005 2142 2376 2536 1935 2504 2013 4627 4.27 205.25 354.5 Women's Spotlight Size 12 Women's Spotlight Size 12.03 469.00 41.564.27 205.66 406.27 205.675 2369 3.35 439.131.296.440.5 Men's Spotlight Size 7 Men's Spotlight Size 7.5 Men's Spotlight Size 11 Men's Spotlight Size 11.27 205.296.45 513.47 754.71 116.5 Women's Speaker Size 11 Women's Speaker Size 11.71 116.25 486.27 205.5 Women's Spotlight Size 11 Women's Spotlight Size 11.29 558.246.5 Men's Spotlight Size 13 Men's Spotlight Size 14 Men's Spotlight Size 15 Women's Spotlight Size 5 Women's Spotlight Size 5.351.5 Women's Spotlight Size 6 Women's Spotlight Size 6.5 Men's Spotlight Size 9 Men's Spotlight Size 9.76 135.63 680.5 Men's Speaker Size 12 Men's Speaker Size 12.683.27 205.27 205.247.08 58.00 0.438.68 100.5 Men's Speaker Size 11 Men's Speaker Size 11.71 116.27 205.27 205.905.5 Men's Spotlight Size 6 Men's Spotlight Size 6.010.089 2286 2.5 Men's Spotlight Size 8 Men's Spotlight Size 8.27 205.478.27 205.51 949.70 .918.337.19 352.09 376.690.267.27 205.27 205.22 498.77 194.5 Women's Spotlight Size 8 Women's Spotlight Size 8.86 289.86 561.27 205.27 205.5 Women's Spotlight Size 7 Women's Spotlight Size 7.5 Women's Spotlight Size 9 Women's Spotlight Size 9.71 116.27 205.27 205.00 0.29 282.80 174.351.780.5 Women's Spotlight Size 13 Subtotal Tax Freight Miscellaneous Total Billed Price 14866 4807 1666 2.97 194.5 Men's Speaker Size 13 Women's Speaker Size 7 Women's Speaker Size 9.29 67.478.778 2461 3.524.27 205.735.734.317 1658 1981 3555 1179 116.575.33 41.87 729.27 205.5 Women's Speaker Size 10 Women's Speaker Size 10.190.71 116.27 205.16 271.024.099 4787 1670 2399 579 1836 1227 1375 1729 1808 1322 1797 1719 2679 3.94 368.27 205.171.29 980.72 397.71 116.673.197.59 340.911.480 1492 782 7079 7.MS2010MX MS2011MX MS2012MX MS2013MX MS2014MX MS2015MX WS2020MX WS2025MX WS2026MX WS2027MX WS2028MX WS2029MX MS3001MG MS3002MG MS3003MG MS3004MG MS3005MG MS3006MG MS3007MG MS3008MG MS3009MG MS3010MG MS3011MG MS3012MG MS3013MG MS3014MG MS3015MG MS3016MG MS3017MG WS3019MG WS3020MG WS3021MG WS3022MG WS3023MG WS3024MG WS3025MG WS3026MG WS3027MG WS3028MG WS3029MG WS3030MG WS3031MG WS3032MG WS3033MG WS3034MG WS3035MG Men's Speaker Size 10.71 116.688.639.27 205.395.128.880.5 Women's Spotlight Size 10 Women's Spotlight Size 10.83 371.27 205.866.564.06 505.27 205.27 205.08 413.71 116.22 826.09 828.27 205.284.875.721.70 0.85 242.366.38 206.32 91.71 116.71 116.27 205.987.34 487.13 549.27 205.859.27 1.71 116.996. 16 117.66 296.5 Women's Speaker Size 7 Women's Speaker Size 7.15 81.71 116.230.5 Men's Spotlight Size 8 Ship To: Apollo Shoes One Shoe Place Shoetown.373.71 116.71 116.76 139.809 560 1.5 Men's Siren Size 13 Men's Siren Size 13.5 Men's Speaker Size 12.76 139.5 Women's Speaker Size 10 Women's Speaker Size 10.173.60 32.786.777.33 1.5 Women's Siren Size 10.63 834.357.39 .428. net 30.84 336.05 805.757 139.084.71 116.5 Men's Siren Size 14 Women's Siren Size 6 Women's Siren Size 6.93 592.71 116.71 116. Freight paid by Shipper 2/10.71 205.570.71 116.902 5015 1.696 1258 1.71 116.71 116.453 7154 15.771.73 211.65 210.957.5 Women's Speaker Size 11.76 139.08 326.20 295.44 57.71 116.90 1.444 1853 1.943.5 Women's Speaker Size 9 Women's Speaker Size 9.587 4663 1.703.36 404.5 Men's Spotlight Size 7 Men's Spotlight Size 7.76 139.5 Men's Speaker Size 8 Men's Speaker Size 11 Men's Speaker Size 11.894.26 581.5 Men's Speaker Size 13 Women's Speaker Size 5 Women's Speaker Size 5.972.71 116.5 Men's Speaker Size 7 Men's Speaker Size 7.731.71 116.303.923 16235 16.339 2070 2.990 909 374 555 3.5 Men's Siren Size 8 Men's Siren Size 12 Men's Siren Size 12.27 205. ME 00001 Item # Description MS1001GX MS1002GX MS1003GX MS1011GX MS1012GX MS1013GX MS1014GX MS1015GX WS1019GX WS1020GX WS1021GX WS1022GX WS1028GX WS1029GX WS1033GX MS2001MX MS2002MX MS2003MX MS2004MX MS2005MX MS2011MX MS2012MX MS2014MX MS2015MX WS2016MX WS2017MX WS2018MX WS2019MX WS2020MX WS2021MX WS2022MX WS2023MX WS2024MX WS2025MX WS2026MX WS2027MX WS2029MX MS3001MG MS3002MG MS3003MG MS3004MG MS3005MG Page 2 of 2 Men's Siren Size 7 Men's Siren Size 7.5 Men's Spotlight Size 6 Men's Spotlight Size 6.16 1.5 Women's Speaker Size 6 Women's Speaker Size 6.55 170.229.INVOICE No 1004346 Page 1 of 2 Anglonesia Rehabilitation and Reprogramming Institute 31XPZ Chancellor Anglonesia.417.77 544.71 116.77 1.532.936.041.27 205.858.76 139.099.60 348.30 1.980.71 116.768.71 116.520. ME 00001 Quantity Unit Price 2233 2.112 1266 844 410 234 2411 2.409.76 139.92 258. GH327MQ Date VIA: Terms: 12/2/2011 Cargo.71 116.80 432.690.805 1465 696 13490 14.574.76 139.128.71 116.24 77.42 585.300.565.76 139.706 4983 5.137.27 205.71 116.5 Women's Siren Size 11 Women's Siren Size 13 Men's Speaker Size 6 Men's Speaker Size 6.661.301.335.527.900.31 360.12 176.288 15121 6.898.88 380.5 Women's Speaker Size 8 Women's Speaker Size 8.365.39 65.122.764.76 139.76 139.487 13030 13.659.34 1.27 Total 312.566.85 1.744. FOB Destination Bill To: Apollo Shoes One Shoe Place Shoetown.653.270.71 116.078 7955 6.76 139.84 52.27 205.936 2896 1.91 768.38 928.48 1.71 116.36 410.76 116.96 278.961.71 116.76 139.76 139.76 139.40 127.5 Women's Siren Size 7 Women's Siren Size 7.218.64 289. 335.945 2098 1.27 205.27 205.447.635.733.27 205.MS3006MG MS3007MG MS3008MG MS3013MG MS3014MG MS3015MG MS3016MG WS3019MG WS3020MG WS3021MG WS3022MG WS3023MG WS3024MG WS3025MG WS3028MG WS3032MG WS3033MG WS3035MG Men's Spotlight Size 8.211.304.627.67 244.094.060 2495 1.381.00 0.46 323.27 205.20 512.27 266.5 Women's Spotlight Size 12 Women's Spotlight Size 13 Subtotal Tax Freight Miscellaneous Total Billed Price 1296 1.62 59.57 114.27 205.78 0.269.151.65 404.27 205.78 .27 205.27 205.686.27 205.07 437.27 205.5 Men's Spotlight Size 9 Men's Spotlight Size 9.98 353.81 213.041 2132 2.211.970 2478 1.5 Men's Spotlight Size 13 Men's Spotlight Size 14 Women's Spotlight Size 5 Women's Spotlight Size 5.5 Women's Spotlight Size 8 Women's Spotlight Size 9.192 205.90 508.5 Women's Spotlight Size 6 Women's Spotlight Size 6.27 205.84 31.148.5 Women's Spotlight Size 11.5 Women's Spotlight Size 7 Women's Spotlight Size 7.92 351.39 144.713 1617 806 291 557 703 1.656.856.59 165.029.51 331.27 205.27 205.15 430.27 205.659.151.27 205.06 399.00 0.921.27 205.27 205.250.64 422.681.5 Men's Spotlight Size 12 Men's Spotlight Size 12.574 1721 1.00 31. 76 139.27 205.56 57.81 155.5 Men's Siren Size 14 Men's Siren Size 14.017.962.20 139.5 Men's Speaker Size 8 Men's Speaker Size 11 Men's Speaker Size 11.208.71 116.5 Women's Siren Size 7 Women's Siren Size 7.68 191.721.890.5 Men's Spotlight Size 7 Men's Spotlight Size 7.091.71 116.665.249.71 116.53 362.76 139.76 139.76 139.5 Ship To: Apollo Shoes One Shoe Place Shoetown.5 Men's Speaker Size 6 Men's Speaker Size 7 Men's Speaker Size 7.761.27 205.64 246.76 116.141.71 116.445.26 245.28 149.92 157.71 116.76 139.895.349.76 139.84 25.13 388.48 76.28 22.44 173.5 Women's Siren Size 8 Women's Siren Size 8. ME 00001 Item # Description MS1001GX MS1002GX MS1003GX MS1014GX MS1015GX MS1016GX WS1017GX WS1019GX WS1020GX WS1021GX WS1022GX WS1023GX WS1024GX WS1025GX WS1026GX WS1027GX WS1028GX WS1029GX WS1030GX WS1032GX MS2001MX MS2003MX MS2004MX MS2005MX MS2011MX MS2012MX MS2013MX MS2014MX MS2015MX WS2020MX WS2026MX WS2027MX WS2028MX MS3001MG MS3002MG MS3003MG MS3004MG Men's Siren Size 7 Men's Siren Size 7.48 60.93 .27 Total 124.71 205.INVOICE No 1004347 Page 1 of 2 Anglonesia Rehabilitation and Reprogramming Institute 31XPZ Chancellor Anglonesia. FOB Destination Bill To: Apollo Shoes One Shoe Place Shoetown.76 139.480.601.76 139.439.022. ME 00001 Quantity 892 1128 1073 173 103 160 841 1065 1132 1328 919 1243 1373 2378 1220 998 434 179 306 408 1685 2203 3331 2684 2109 731 1088 655 343 3106 2100 733 1053 806 538 603 759 Unit Price 139.76 139.766.5 Women's Siren Size 12.71 116.507.112.71 116.27 205.39 85.16 148.435.799.40 158.5 Women's Siren Size 5 Women's Siren Size 6 Women's Siren Size 6.548.71 116.447.60 117.777. net 30.5 Women's Siren Size 11 Women's Siren Size 11.48 332.71 116.08 196.315.48 14.5 Men's Siren Size 8 Men's Siren Size 13.395.28 170.76 139.501.76 139.26 123.00 85.71 116.5 Women's Siren Size 10 Women's Siren Size 10.76 139.62 110.76 139.980.43 122.35 257.28 128.649. GH327MQ Date VIA: Terms: 12/26/2011 Cargo.5 Men's Speaker Size 12 Men's Speaker Size 12.71 116.76 139.01 126.656.844.48 24.361.76 139.178.32 185.76 139.5 Women's Speaker Size 11 Men's Spotlight Size 6 Men's Spotlight Size 6.76 139.5 Women's Siren Size 9 Women's Siren Size 9.63 165.71 116.655.538.04 42.01 313. Freight paid by Shipper 2/10.05 40.76 139.76 139.5 Men's Speaker Size 13 Women's Speaker Size 7 Women's Speaker Size 10 Women's Speaker Size 10.031. 27 205.691.5 Women's Spotlight Size 10 Women's Spotlight Size 11 Women's Spotlight Size 11.27 205.5 Women's Spotlight Size 7 Women's Spotlight Size 9.23 221.434.27 205.27 205.86 8.60 154.27 205.779.09 .27 205.927.27 205.12 90.274.51 298.55 25.52 205.09 0.00 0.5 Women's Spotlight Size 13 Subtotal Tax Freight Miscellaneous Total Billed Price 793 580 754 1176 1003 1065 125 214 656 441 1113 849 1080 1613 1456 728 518 205.27 205.5 Men's Spotlight Size 12.329.27 205.27 205.612.397.885.658.81 218.889.27 205.465.60 331.78 134.27 205.100.889.873.75 43.51 174.11 119.5 Men's Spotlight Size 9.056.00 0.27 205.524.Page 2 of 2 MS3005MG MS3006MG MS3008MG MS3009MG MS3011MG MS3012MG MS3014MG MS3015MG MS3017MG WS3019MG WS3022MG WS3023MG WS3028MG WS3029MG WS3031MG WS3032MG WS3035MG Men's Spotlight Size 8 Men's Spotlight Size 8.56 106.00 8.27 205.5 Men's Spotlight Size 10 Men's Spotlight Size 11 Men's Spotlight Size 11.434.657.5 Men's Spotlight Size 13 Men's Spotlight Size 15 Women's Spotlight Size 5 Women's Spotlight Size 6.12 149.07 228.436.27 205.58 241.27 162.27 205.773. 080 1.424 A53 A54 A55 A56 A57 A58 A59 A60 A61 A62 A63 A64 A65 A66 A67 A68 A69 A70 A71 A72 A73 A74 A75 A76 A77 A78 A79 A80 A81 A82 A83 A84 A85 A86 A87 A88 A89 A90 A91 A92 A93 A94 A95 A96 A97 A98 A99 A100 A101 A102 A103 A104 B33 B34 B35 B36 B37 B38 7.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 381 1.840 4.123 B39 B40 B41 B42 B43 B44 B45 B46 8.080 1. 2011 Pallet Location Sku# Size Pallet Quantity Style Type A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11 A12 A13 A14 A15 A16 A17 A18 A19 A20 A21 A22 A23 A24 A25 A26 A27 A28 A29 A30 A31 A32 A33 A34 A35 A36 A37 A38 A39 A40 A41 A42 A43 A44 A45 A46 A47 A48 A49 A50 A51 A52 10010Siren 10010Siren 10010Siren 10010Siren 10020Siren 10020Siren 10020Siren 10020Siren 10020Siren 10030Siren 10030Siren 10030Siren 10030Siren 10040Siren 10040Siren 10040Siren 10040Siren 10050Siren 10050Siren 10050Siren 10050Siren 10050Siren 10060Siren 10060Siren 10060Siren 10060Siren 10060Siren 10070Siren 10070Siren 10070Siren 10070Siren 10070Siren 10080Siren 10080Siren 10080Siren 10080Siren 10080Siren 10090Siren 10090Siren 10090Siren 10090Siren 10100Siren 10100Siren 10110Siren 10110Siren 10110Siren 10110Siren 10120Siren 10120Siren 10120Siren 10130Siren 10130Siren Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's 7 7 7 7 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 8 8 8 8 8 1/2 8 1/2 8 1/2 8 1/2 9 9 9 9 9 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 10 10 10 10 10 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 11 11 11 11 11 1/2 11 1/2 12 12 12 12 12 1/2 12 1/2 12 1/2 13 13 1.Post Physical Inventory Count (1 of 3) December 31.080 1.080 1.080 1.002 4.756 2.080 490 1.540 .080 1.080 747 1.080 1.080 1.080 1.080 1.080 1.080 1.080 889 1.080 1.080 992 1.080 1.080 1.572 4.080 1.080 1.715 740 658 609 823 968 14.170 B56 B57 B58 B59 B60 B61 B62 Sku# Style Type 10140Siren 10150Siren 10160Siren 10170Siren 10170Siren 10180Siren 10180Siren 10180Siren 10190Siren 10190Siren 10190Siren 10190Siren 10200Siren 10200Siren 10200Siren 10200Siren 10200Siren 10210Siren 10210Siren 10210Siren 10210Siren 10210Siren 10210Siren 10220Siren 10220Siren 10220Siren 10220Siren 10230Siren 10230Siren 10230Siren 10230Siren 10230Siren 10240Siren 10240Siren 10240Siren 10250Siren 10250Siren 10250Siren 10250Siren 10250Siren 10260Siren 10260Siren 10260Siren 10270Siren 10270Siren 10280Siren 10280Siren 10290Siren 10300Siren 10310Siren 10320Siren 10330Siren Men's Men's Men's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 20040Speaker 20040Speaker 20040Speaker 20040Speaker 20040Speaker 20040Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20050Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker 20060Speaker Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Pallet Quantity Total Quantity 13 1/2 14 14 1/2 5 5 5 1/2 5 1/2 5 1/2 6 6 6 6 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 7 7 7 7 7 7 7 1/2 7 1/2 7 1/2 7 1/2 8 8 8 8 8 8 1/2 8 1/2 8 1/2 9 9 9 9 9 9 1/2 9 1/2 9 1/2 10 10 10 1/2 10 1/2 11 11 1/2 12 12 1/2 13 746 408 352 1.080 1.080 513 1. Inc Inventory Warehouse Report -.080 1.080 1.080 251 1.080 1.080 1.080 252 1.581 4.644 1.080 1.640 4.000 5.080 1.080 1.080 1.080 890 1080 1.080 392 1.080 253 1.080 1.080 Size 1.080 1.827 2.080 1.080 1.080 17 1.080 635 740 658 609 823 968 746 408 352 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 8 8 8 8 8 8 8 8 8 8 8 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 1.080 1.080 1.080 217 1.650 4.080 260 1.080 839 1.080 1.080 1.080 1.080 1.080 Total Quantity Pallet Location 4.130 4.080 1.080 421 1.080 1.257 11.420 1.080 1.080 404 1.080 1.080 1.080 1.080 1.080 1.080 1.080 265 1.080 740 1.781 3.080 1.632 2.080 1.080 1.080 1.080 1.080 436 1.080 1.080 1.080 1.080 1.080 1.080 1.337 4.080 1.080 320 1.080 1.080 1.673 2.080 1.080 1.080 762 1.080 1.080 1.080 1.080 1.080 1.351 B47 B48 B49 B50 B51 B52 B53 B54 B55 9.585 3.080 1080 680 1.491 4.080 530 1.080 1.079 4.080 1.080 643 1.080 1.080 1.080 520 1.080 1.080 1.080 1.080 694 1.774 3.080 1.080 1.080 1.573 2.080 1.080 791 1.080 1.080 1.080 1.072 1.080 1.080 1.080 1.129 5.080 344 B1 B2 B3 B4 B5 B6 B7 B8 B9 B10 B11 B12 B13 B14 B15 B16 B17 B18 B19 B20 B21 B22 B23 B24 B25 B26 B27 B28 B29 B30 20010Speaker 20010Speaker 20010Speaker 20010Speaker 20010Speaker 20010Speaker 20010Speaker 20020Speaker 20020Speaker 20020Speaker 20020Speaker 20020Speaker 20020Speaker 20020Speaker 20020Speaker 20030Speaker 20030Speaker 20030Speaker 20030Speaker 20030Speaker 20030Speaker 20030Speaker 20030Speaker 20030Speaker 20040Speaker 20040Speaker 20040Speaker 20040Speaker 20040Speaker 20040Speaker Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's 6 6 6 6 6 6 6 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 7 7 7 7 7 7 7 7 7 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 1.Apollo Shoes.080 1.080 1. 080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 B63 B64 20060Speaker 20060Speaker Men's Men's 8 1/2 8 1/2 1.080 1.626 .080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1. Inc Inventory Warehouse Report -.080 1.080 1.080 1.080 1.080 1.080 1.002 1.080 305 1.080 1.764 1.080 1.232 14. 2011 B65 B66 B67 B68 B69 B70 B71 B72 B73 B74 B75 B76 B77 B78 B79 B80 B81 B82 B83 B84 B85 B86 B87 B88 B89 B90 B91 B92 B93 B94 B95 B96 B97 B98 B99 B100 B101 B102 B103 B104 B105 B106 B107 B108 B109 B110 B111 B112 B113 B114 B115 B116 B117 B118 B119 B120 B121 B122 B123 B124 B125 B126 B127 B128 B129 B130 B131 B132 B133 B134 B135 B136 B137 B138 B139 B140 B141 B142 B143 B144 B145 B146 B147 B148 B149 B150 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20070Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20080Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20090Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20100Speaker 20110Speaker 20110Speaker 20110Speaker 20110Speaker 20110Speaker 20110Speaker 20110Speaker 20110Speaker 20110Speaker 20120Speaker 20120Speaker 20120Speaker 20130Speaker 20130Speaker 20130Speaker 20140Speaker 20140Speaker 20140Speaker 20150Speaker 20150Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20160Speaker 20170Speaker 20170Speaker Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 10 1/2 11 11 11 11 11 11 11 11 11 11 1/2 11 1/2 11 1/2 12 12 12 12 1/2 12 1/2 12 1/2 13 13 5 5 5 5 5 5 5 5 5 5 5 5 5 1/2 5 1/2 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.162 2.080 1.080 1.080 1.080 1.080 1.080 1.080 1.170 3.080 1.080 1.080 1.080 1.080 1.080 280 1.080 1.080 1.080 1.080 1.080 865 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.Post Physical Inventory Count (2 of 3) December 31.080 1.080 1.080 1.080 1.012 9.080 1.080 1.080 1.080 79 1.080 1.975 B151 B152 B153 B154 B155 B156 B157 B158 B159 B160 B161 B162 B163 B164 B165 B166 B167 B168 B169 B170 B171 B172 B173 B174 B175 B176 B177 B178 B179 B180 B181 B182 B183 B184 B185 B186 B187 B188 B189 B190 B191 B192 B193 B194 B195 B196 B197 B198 B199 B200 B201 B202 B203 B204 B205 B206 B207 B208 B209 B210 B211 B212 B213 B214 B215 B216 B217 B218 B219 B220 B221 B222 B223 B224 B225 B226 B227 B228 B229 B230 B231 B232 B233 B234 B235 B236 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20170Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20180Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20190Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20200Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20210Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20220Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20230Speaker Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 5 1/2 6 6 6 6 6 6 6 6 6 6 6 6 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 6 1/2 7 7 7 7 7 7 7 7 7 7 7 7 7 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.620 14.890 13.080 660 1.080 1.080 1.080 1.080 1.080 1.080 1.425 10.080 1.080 1.080 1.080 1.080 95 1.080 1.080 52 1.080 153 15.080 1.080 1.080 1.080 15.080 1.080 1.260 13.080 220 1.080 1.080 1.080 586 1.080 1.080 1.080 1.080 1.080 13.080 1.080 1.080 1.080 1.B31 B32 20040Speaker 20040Speaker Men's Men's 7 1/2 7 1/2 1.010 1.116 12.080 1.080 1.080 1.080 1.080 236 1.569 12.080 1.080 1.080 1.080 1.080 530 1.080 1.080 1.360 11.080 1.080 1.273 Apollo Shoes.080 604 1.080 1.080 1.080 1.239 2.080 609 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 1.080 512 1.080 1.905 14.080 1.080 1.080 1.080 1.080 1.080 1.080 1. 378 3.Apollo Shoes.080 1.080 1.256 2.080 1.884 3.080 1.320 2.096 12.051 C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17 C18 C19 C20 C21 C22 C23 C24 C25 C26 C27 C28 C29 C30 C31 C32 C33 C34 C35 C36 C37 C38 C39 C40 C41 C42 C43 C44 C45 C46 C47 C48 C49 C50 C51 C52 C53 C54 C55 C56 C57 C58 C59 C60 C61 30010Spotlight 30010Spotlight 30010Spotlight 30010Spotlight 30020Spotlight 30020Spotlight 30020Spotlight 30030Spotlight 30030Spotlight 30030Spotlight 30040Spotlight 30040Spotlight 30040Spotlight 30050Spotlight 30050Spotlight 30050Spotlight 30060Spotlight 30060Spotlight 30060Spotlight 30070Spotlight 30070Spotlight 30070Spotlight 30070Spotlight 30080Spotlight 30080Spotlight 30080Spotlight 30090Spotlight 30090Spotlight 30090Spotlight 30100Spotlight 30100Spotlight 30100Spotlight 30110Spotlight 30110Spotlight 30120Spotlight 30120Spotlight 30120Spotlight 30130Spotlight 30130Spotlight 30140Spotlight 30150Spotlight 30160Spotlight 30160Spotlight 30170Spotlight 30170Spotlight 30180Spotlight 30180Spotlight 30180Spotlight 30190Spotlight 30190Spotlight 30200Spotlight 30200Spotlight 30200Spotlight 30200Spotlight 30210Spotlight 30210Spotlight 30210Spotlight 30210Spotlight 30220Spotlight 30220Spotlight 30220Spotlight Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Men's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 6 6 6 6 6 1/2 6 1/2 6 1/2 7 7 7 7 1/2 7 1/2 7 1/2 8 8 8 8 1/2 8 1/2 8 1/2 9 9 9 9 9 1/2 9 1/2 9 1/2 10 10 10 10 1/2 10 1/2 10 1/2 11 11 11 1/2 11 1/2 11 1/2 12 12 12 1/2 13 14 14 15 15 23 23 23 5 5 5 1/2 5 1/2 5 1/2 5 1/2 6 6 6 6 6 1/2 6 1/2 6 1/2 1.080 169 1.080 1.080 1.582 3.779 4.518 565 939 1.633 2.080 987 1.760 4.080 1.080 1.080 539 1.080 1.080 121 1.080 522 1.080 1.080 1.080 1.080 1.080 1.080 16 1.080 1.080 1.134 3.080 473 1.080 1.080 1.080 291 1.080 1.161 2.080 856 1.080 804 1.304 1.080 1.080 1.361 3.080 1.080 74 1.080 1.080 1.080 1.080 983 3.080 1.080 1.234 1.901 3.Post Physical Inventory Count (3 0f 3) December 31.080 1.080 B260 B261 B262 14.080 1.080 1.080 1.080 947 1.080 400 1.531 4.080 1. 2011 B237 B238 B239 B240 B241 B242 B243 B244 B245 B246 B247 B248 B249 B250 B251 B252 B253 B254 B255 B256 B257 B258 B259 20230Speaker 20230Speaker 20230Speaker 20230Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20240Speaker 20250Speaker 20250Speaker 20250Speaker 20250Speaker 20250Speaker Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 8 1/2 8 1/2 8 1/2 8 1/2 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 1.080 1.080 1.080 1.080 438 565 939 1.260 1.080 1.080 1.080 203 1.127 3.080 1.346 2.080 1.330 3.518 3.147 3.116 B263 B264 B265 B266 B267 B268 B269 B270 B271 B272 B273 B274 B275 B276 14.080 1.080 1.080 1.276 2.080 1.080 1.080 1.080 1.080 1.080 1.080 1.076 1.080 358 1.080 1.080 1.107 2.560 3.080 76 1.080 818 1.080 373 1.080 100 1.080 1.080 262 1.080 581 1.080 1.489 4.080 1.080 186 1.080 1.079 3.080 520 1.080 1.080 1.071 3.081 1.080 481 1.413 B277 B278 B279 B280 B281 B282 20250Speaker 20250Speaker 20250Speaker 20250Speaker 20250Speaker 20250Speaker 20250Speaker 20260Speaker 20260Speaker 20260Speaker 20260Speaker 20260Speaker 20260Speaker 20260Speaker 20260Speaker 20270Speaker 20270Speaker 20270Speaker 20270Speaker 20280Speaker 20280Speaker 20280Speaker 20290Speaker Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 9 1/2 10 10 10 10 10 10 10 10 10 1/2 10 1/2 10 1/2 10 1/2 11 11 11 11 1/2 1.080 190 1.080 36 1.080 1.080 1.083 8.187 2.080 1.080 1.762 2.080 1.080 1.080 1.270 1.080 1.185 2.316 4.080 1.027 1.080 1.080 240 1.080 1.080 1.641 2.080 144 1.080 1.025 1.080 991 1.080 1.080 90 1.080 1.080 1. Inc Inventory Warehouse Report -.051 4.080 1.080 C62 C63 C64 C65 C66 C67 C68 C69 C70 C71 C72 C73 C74 C75 C76 C77 C78 C79 C80 C81 C82 C83 C84 C85 C86 C87 C88 C89 C90 C91 C92 C93 C94 C95 C96 C97 C98 C99 C100 C101 C102 C103 C104 C105 C106 C107 C108 C109 C110 30220Spotlight 30220Spotlight 30230Spotlight 30230Spotlight 30230Spotlight 30230Spotlight 30240Spotlight 30240Spotlight 30240Spotlight 30240Spotlight 30240Spotlight 30250Spotlight 30250Spotlight 30250Spotlight 30250Spotlight 30260Spotlight 30260Spotlight 30260Spotlight 30260Spotlight 30260Spotlight 30270Spotlight 30270Spotlight 30270Spotlight 30270Spotlight 30280Spotlight 30280Spotlight 30280Spotlight 30280Spotlight 30290Spotlight 30290Spotlight 30290Spotlight 30290Spotlight 30300Spotlight 30300Spotlight 30310Spotlight 30310Spotlight 30310Spotlight 30320Spotlight 30320Spotlight 30320Spotlight 30330Spotlight 30330Spotlight 30330Spotlight 30330Spotlight 30340Spotlight 30340Spotlight 30340Spotlight 30350Spotlight 30350Spotlight Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's Women's 6 1/2 6 1/2 7 7 7 7 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 8 8 8 8 8 1/2 8 1/2 8 1/2 8 1/2 8 1/2 9 9 9 9 9 1/2 9 1/2 9 1/2 9 1/2 10 10 10 10 10 1/2 10 1/2 11 11 11 11 1/2 11 1/2 11 1/2 12 12 12 12 12 1/2 12 1/2 12 1/2 13 13 1.080 894 1.080 1.080 1.063 .080 1.080 967 1.080 919 1. . 4.782. the cancelled check (# 3582). about how the company is doing. Do some analytic procedures on interest income to make sure that it is reasonable with respect to the interest rate on the bank confirmation and compared to last year. I checked with Dave Masterson. The amount is the same amount as the December 26 purchase of the investment in Synergizer. When I had lunch with Eric Unum. You may want to think about the Phoneshoe patent. I examined the broker’s confirmation. The price of the stock was unchanged as of December 31 from its purchase price of $23. we discussed Apollo’s recent purchase of Synergizer Battery stock. You should investigate this further.63. insurance expense looks really low compared to last year’s – better check it out. they either recognize miscellaneous income or expense to clear it out. Shock-Proof Socks is one of our firm’s clients. With the information below. Investment income is composed of the equity earning in Shock-Proof Socks and a transfer from the Controller’s Clearing Account for $480. I would be surprised if Apollo will ever be able to purchase even 5% of Synergizer’s stock.04. 3. 2. The company has yet to pay out any dividends though.375. examining cancelled checks. If there is a balance at the end of the year. He said that after reporting no income for several years. I think you can complete the Investments and other assets sections (I-1): 1.80. Personally. The clearing account is a temporary account Apollo uses for out of balance items and transactions they can’t identify. since the company has decided to discontinue research and development efforts on it.000 shares in Apollo’s name. the audit manager. By luck. While in his office. examining titles.) for you on prepaids and fixed assets.cpa> Subject: Prepaids and Other Assets Prepaids Audit prepaids. Because the amounts are not significant.Date: 26 JAN 2012 10:24:53 +0000 From: "Darlene Wardlaw" <DW@aow. . There just isn’t a lot of exposure there.854. let “the Crumpler” do most of the legwork (vouching invoices. and examined the stock certificate for 20. 5. they struck gold in 2011. etc. He indicated that Larry eventually wanted to purchase controlling stock in the company when Apollo started moving production inhouse. Other Assets Since I know that your hands have been full. reporting total income of $3. but don’t spend too much time on them. On second thought. I tried to help out with other assets. dated January 1. 2012 Anderson. premium $108.320.000 deductible. had the following insurance policies listed with this agency: State Fire Insurance: Policy # 624-3200. $50. LA 70803 Phone: 225-555-1212 January 19. 2009. 2009. fidelity bond on employees and directors. 3-year term.000. Bubba Thibodeaux Louisiana Insurance Agency . fire and extended coverage on plant building and contents. 5-year term. It was a one-year policy with a premium of $464. 4-year term. premium $ 2. dated January 1. $500.414.232.76. corporate vehicle liability. dated January 1.000. Suite 225 Baton Rouge. 2011.000. $250. Rock Solid Fidelty: Policy # UTK-394. Inc.006.Acadiana Insurance Agency 2132 Highland Road.92.32. ME This is to confirm that during 2011.414. Apollo Shoes. premium $1.000. $100. Sincerely Yours. The previous fidelity bond policy (UTK-393) expired as of December 31. Ironworks Insurance Group: Policy # l645-O32-692. 2010. Olds and Watershed Certified Public Accountants Shoetown.667. 003. Inc.00 $1.00 $1.374.314.264.106.572.574.696.667.406.78 14300Office Supplies .32 $36.382.00 $950.32 $1.000.78 14200Prepaid Rent $200.891.82 $26.540.213.Apollo Shoes.00 $0.00 $7.00 $24.721.82 $8.92 $3.006.38 $2.74 $3.753.20 $3.203.605. Prepaid Expenses Lead Schedule For Year Ended 12/31/2011 E-1 Prepared by Reviewed by PBC Acct # Account Title (Audited) Balance 12/31/2010 Additions Amortization/ Disposals Unaudited Balance 12/31/2011 14100Prepaid Insurance $743.025.574. 089.426.00 $2.840. Inc.39 $0.620.052.59 .691.31 $0.59 $626.00 $480.558.089.038.80) $612.59 $480.08 $945.31 $0.51 $0.67 $1.80 $0.000 shares purchased at $23.404.780.00 $0.375.98 19900 Other Non-current Assets 12/31/2010Phoneshoe patent registration expenses $13.63 per share on 12/26.00 $2. Other Assets Lead Schedule For Year Ended 12/31/2011 I-1 Prepared by Reviewed by PBC Acct # 19000 Date (Audited) Cost 12/31/2010 Description Additions Deletions Unaudited Balance 12/31/2011 Equity Investments 6/24/2009Shock Proof Socks.691.80 $612. 12/26/2011Synergizer Battery Company 25% Share 20.08 $1.375.713. (Commission costs amounted to 7.531. Inc.Apollo Shoes.775.00 $1.426.00 $13.840. 000 each for building rental through June 30. Even though they moved into a new building in February 2010. I observed the counting of office supplies on December 31. 2011. I don’t know or understand what you want me to do with the insurance confirmation. As I noted in my e-mail about the inventory observation. I’ll let you do that. . they couldn’t get out of their lease until this year.Date: 3 FEB 2012 12:35:15 +0000 From: "Bradley Crumpler" <
[email protected]> Subject: Prepaids Well I did all your work for you (again!): I examined five cancelled checks written during the year for $200. They all appeared to be there. Date: 26 JAN 2012 10:24:53 +0000 From: "Darlene Wardlaw" <
[email protected]> Subject: Fixed Assets They purchased quite a bit of computer equipment in the last couple of years. When you audit PP&E, let “the Crumpler” do most of the legwork (vouching invoices, examining cancelled checks, examining titles, etc.) for you. Given all of the recent additions, make sure that the depreciation amounts are correct. Apollo Shoes, Inc. Fixed Asset Detail Listing 12/31/2011 F-1 Prepared by Reviewed by Depreciation Expense PBC Fixed Asset Acquisition Tag Date A32767 A32766 A32768 A32769 A32764 Miscellaneous PC0001 PC0002 PC0003 PC0004 PC0005 PC0006 PC0007 PC0008 PC0009 PC0010 PC0011 PC0012 PC0013 PC0014 PC0015 PC0016 PC0017 PC0018 E00001 M0001 7/3/2008 9/1/2009 9/1/2009 9/1/2009 9/1/2009 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010 4/14/2011 7/6/2011 1/5/2011 Description Landrover Jaguar Landrover Landrover Landrover Land Building Office furniture Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Smart Chip 5 Ghz PC Repair/Repaint original building New computing system Machinery Cost $45,000.00 $102,000.00 $51,000.00 $51,000.00 $51,000.00 $117,000.00 $623,905.92 $38,178.54 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $5,279.93 $50,408.00 $1,200,519.90 $1,295,359.98 $3,720,411.05 Estimated Useful Life 5 5 5 5 5 15 6 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 30 5 5 2008 2009 5000 $9,000.00 $6,800.00 $3,400.00 $3,400.00 $3,400.00 2010 2011 $9,000.00 $20,400.00 $10,200.00 $10,200.00 $10,200.00 $9,000.00 $20,400.00 $10,200.00 $10,200.00 $10,200.00 $38,127.58 $5,832.81 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $1,613.31 $41,593.73 $6,363.09 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,759.98 $1,260.20 $120,051.99 $185,051.43 $446,000.00 $5,000.00 $26,000.00 $133,000.00 Accumulated Depreciation $32,000.00 $47,600.00 $23,800.00 $23,800.00 $23,800.00 $0.00 $79,721.31 $12,195.90 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $3,373.29 $1,260.20 $120,051.99 $185,051.43 $610,000.01 Apollo purchased and installed a new computer system in July.000 for “system analysis consulting.Date: 3 FEB 2012 12:35:15 +0000 From: "Bradley Crumpler" <TheCrumpler@AOW. I examined the titles of the land.” I scanned the invoices in the Repairs and Maintenance account.com> Subject: PP&E I mean. The third was to Professor Josephine Mandeville for $200.98 as well as the cancelled check.000.295. they have been buying all the shoes pre-made from an overseas company. (All of their salesmen rent cars on an as needed basis for visiting clients.000. One was to Smart Chip for $1. there have been only three major capital additions: Apollo repaired damage to the new building from a hurricane in April.000) were expensed according to company policy. The machinery was installed in January. They hope to start production in January 2012. and vehicles. the fixed asset coordinator. Inc.” as titleholder.00 as well as the cancelled check. the building was repainted at the same time.408.90. Also.) Since the move. I examined an invoice for $1. I examined three invoices and related cancelled checks for $1. I examined an invoice from ZZZ Best Building Repair Company for $50. building. Apparently. All listed “Apollo Shoes.200. Up to that time. but hasn’t yet been operated.90. .359. One was to FastMove for moving services for $519. Apollo purchased only a fleet of vehicles for key executives and rented everything else. The company purchased and installed new machinery to make shoes themselves. Repairs and small capital additions (<$5. do you ever work?!? So here is what I found out: According to Sam Shaw. Apollo Shoes moved into new quarters and acquired new equipment in February 2010.519. . Per your instructions. From the cutoff bank statement in the B-series workpapers. I got a list of all the checks that cleared by January 18. the unmatched receiving report file.com> Subject: Search for Unrecorded Liabilities Hey. If you want to stay out of trouble with Darlene. The information is posted in the attached workpaper (L-3). I removed all checks written before 12/31. How am I supposed to know if Apollo owes any money or not? I am going back to the driving range.Date: 3 FEB 2012 16:35:38 +0000 From: "Bradley Crumpler" <TheCrumpler@AOW. I suggest you’d better prepare the working paper and any necessary adjustments. . I then traced the remaining checks to the voucher packets. 3. 4. and the unmatched invoice file (something that I forgot to do in my initial search audit procedures). I also examined documents in the open purchase order file. so I went back over your review notes and this is what I did: 1. as they would not relate to December 31 outstanding liabilities anyway. 2. chill out! I am just doing this gig while I wait to qualify for the PGA tour! Ok. 414.47 $55.32 $0.086.99 .Apollo Shoes.470.00 $1.414.00 $0.69 $8.99 $11.91 $0.118.439. Inc.00 $0.815.033.86 $0.99 $11.12 $0.69 $8.65 $583.99 $6.922.439.01 $118.095.00 $0.09 $1.318.00 $29.633.318.00 $2.106.65 $583. Schedule of Current Liabilities For Year Ended 12/31/2011 L-1 Prepared by Reviewed by PBC Acct # Account Title 20000 Accounts Payable 23100 Sales Tax Payable 23200 Wages Payable 23300 FICA Employee Withholding 23350 Medicare Withholding 23400 Federal Payroll Taxes Payable 23500 FUTA Tax Payable 23600 State Payroll Taxes Payable 23700 SUTA Tax Payable 23800 FICA Employer Withholding 23900 Medicare Employer Withholding 2010 2011 $4.00 $1. 00 Tiger Jaguar Dealership $0.00 $1.00 $6.224.99 Smart Chip Squint Telephone and Cellular $0. Inc.117.891.00 Zrocks $0.91 .00 B.994.12 $0.00 $1.19 Sign Up! $4.45 Office Hacks Supplies $1.16 Synergizer Battery Company $0.095.902. Franklin's LP&E $0.Apollo Shoes.868.922. LLC $6.00 Fleur de Lis Catering Just Boxes Lawyers "R" Us. Accounts Payable Schedule For Year Ended 12/31/2011 L-2 Prepared by Reviewed by PBC List of Approved Vendors Anglonesian Institute for Reprograming and Rehabilitation $0. Inc.16 1/10/2012Squint Cellular 3628 1/13/2012 $6.12 1/10/2012Fleur de Lis Catering 3625 1/13/2012 $124.Chicago.96 $4.88 1/10/2012B.81 1/10/2012Office Hacks 3626 1/13/2012 $15.868.99 $5.Apollo Shoes. picked up 12/30/2011 1/10/2012Computer purchased 1/10/20112 12/31/2011New logos on vehicles on 12/31/2011 1/10/2012Copy machine purchased 1/10/2012 1/10/2012Computer supplies picked up 1/10/2012 . Search for Unrecorded Liabilities For Year Ended 12/31/2011 From Cutoff Bank Statement: From Check Register Check Date Amount Date of Check Payee 3622 1/13/2012 $6. Franklin's LP&E 3627 1/13/2012 $6. This inventory was counted and included in the physical inventory at the end of the year.434. 1/3/2012The goods were received on January 6 with bill of lading showing a January 3 shipping date and marked FOB. The accounts payable clerk indicated that the office party was held the afternoon of the 30th and the receiving report was probably not forwarded until the next working day so was not included in year-end accounts payable.216.43 1/10/2012Sam Shaw 3629 1/13/2012 $927. 12/31/2011Business cards.00 $585.174.889. 1/7/2012Packaging material ordered 1/7.025. Shipping .09 1/10/2012Anglonesia R&R Institute 3632 3633 3634 3635 3636 1/10/2012Office Hacks 1/10/2012Smart Chip 1/10/2012Sign Up! 1/10/2012Zrocks 1/10/2012Smart Chip 1/14/2012 1/13/2012 1/14/2012 1/13/2012 1/13/2012 $1.924.419.19 $6.09 1/10/2012Just Boxes 3630 1/14/2012 $8.69 1/10/2012Synergizer Battery Company 3631 1/14/2012 $8.13 1/10/2012Tiger Jaguar Dealership 3624 1/14/2012 $6.93 1/10/2012Smart Chip 3623 1/13/2012 $2.994.683. 12/27/2011The receiving report was dated December 31.28 L-3 Prepared by BC Reviewed by From Voucher Packet Invoice Date Description 12/27/2011Annual computer maintenance contract—2012 1/9/2012Automobile maintenance on 1/9/2012 12/31/2011Catered Holiday party 1/10/2012Office supplies purchased 1/10/2012 1/6/2012"For December electricity" 1/5/2011December telephone bill N/A Car washes for fleet of automobiles on 1/13.937.117.891. 000.00 2/2/2011 Additions $10.000.053.00 .000.000.053.000.00 $44. Inc.00 $0.00 $54.00 $0.000.000.00 $10.000.00 $10.000.053.000.000.000.00 $10.Apollo Shoes.000. Notes Payable Schedule For Year Ended 12/31/2011 PBC Acct # Account Title 27000Notes Payable-Noncurrent 24100Line of Credit 24200Current Portion Long-Term Debt (Audited) Balance 12/31/2010 $0.00 $54.00 $10.000.000.000.00 7/1/2011 $44.053.00 N-1 Prepared by Reviewed by Payments 2/2/2011 Unaudited Balance 12/31/2011 $10. . the internal auditors have been watching payroll closely.Date: 7 FEB 2012 16:37:45 From: "Darlene Wardlaw" <DW@aow. You may want to compare key executives’ salaries with those authorized in the Board minutes to make sure that they are reasonable. if I remember correctly.cpa> Subject: Payroll One area that we haven’t looked at yet is payroll. . Don’t worry about Schedule X (referenced in the service auditor’s report) – I will go through it and include it in the workpapers later. Can you prepare a memo (ICP-1) discussing our responsibilities for auditing the controls at a service organization and whether a SAS 70 report fulfills our obligations under Section 404 of SOX? Also. this is the first SAS 70 report that I have seen. Also. Substantive Payroll Procedures (L-4) I don’t think we need to do any detail testing on payroll. if necessary. You won’t need to accrue for State and Federal Unemployment as they are applied only to the first $7. but to be honest. Don’t forget to accrue for wages payable for the last days of December. Last year’s numbers should be close to the current year. Please tie in the ending number (“earnings for year”) to the trial balance. I’ve attached a copy of the year-end payroll register from the third party payroll processing company. there are two types of SAS 70 reports. Because there has been little turnover. Compare current year numbers to last years to see if they are reasonable.000 of income. I have obtained a copy of their SAS 70 report. but I don’t know which one we need and whether the attached letter is a Type 1 or Type 2 report. we can use analytic procedures to get the comfort necessary. Apollo collects information and forwards it to a third party payroll processing company. To the Board of Directors of Roll Pay Payroll Services, Inc. We have examined the accompanying description of controls related to the application of Roll Pay Payroll Services, Inc. Our examination included procedures to obtain reasonable assurance about whether (1) the accompanying description presents fairly, in all material respects, the aspects of Roll Pay Payroll Services, Inc.'s controls that may be relevant to a user organization's internal control as it relates to an audit of financial statements, (2) the controls included in the description were suitably designed to achieve the control objectives specified in the description, if those controls were complied with satisfactorily, and (3) such controls had been placed in operation as of December 31, 2011. The management of Roll Pay Payroll Services, Inc. is responsible for designing, describing and maintaining these controls. Our examination was performed in accordance with standards established by the American Institute of Certified Public Accountants and included those procedures we considered necessary in the circumstances to obtain a reasonable basis for rendering our opinion. In our opinion, the accompanying description of the aforementioned application presents fairly, in all material respects, the relevant aspects of Roll Pay Payroll Services, Inc.’s controls that had been placed in operation as of December 31, 2011. Also, in our opinion, the controls, as described, are suitably designed to provide reasonable assurance that the specified control objectives would be achieved if the described controls were complied with satisfactorily. In addition to the procedures we considered necessary to render our opinion as expressed in the previous paragraph, we applied tests to specific controls, listed in Schedule X, to obtain evidence about their effectiveness in meeting the control objectives, described in Schedule X, during the period from January 1, 2011 to December 31, 2011. The specific controls and the nature, timing, extent, and results of the tests are listed in Schedule X. This information has been provided to user organizations of Roll Pay Payroll Services, Inc. and to their auditors to be taken into consideration, along with information about the internal control at user organizations, when making assessments of control risk for user organizations. In our opinion the controls that were tested, as described in Schedule X, were operating with sufficient effectiveness to provide reasonable, but not absolute, assurance that the control objectives specified in Schedule X were achieved during the period from January 1, 2011 to December 31, 2011. The relative effectiveness and significance of specific controls at Roll Pay Payroll Services, Inc. and their effect on assessments of control risk at user organizations are dependent on their interaction with the controls and other factors present at individual user organizations. We have performed no procedures to evaluate the effectiveness of controls at individual user organizations. The description of controls at Roll Pay Payroll Services, Inc. is as of December 31, 2011 and information about tests of the operating effectiveness of specific controls covers the period January 1, 2011 to December 31, 2011. Any projection of such information to the future is subject to the risk that, because of change, the description may no longer portray the controls in existence. The potential effectiveness of specific controls at the Service Organization is subject to inherent limitations and, accordingly, errors or fraud may occur and not be detected. Furthermore, the projection of any conclusions, based on our findings, to future periods is subject to the risk that changes may alter the validity of such conclusions. This report is intended solely for use by the management of Roll Pay Payroll Services, Inc., its customers, and the independent auditors of its customers. Michael Scarn, CPA Scranton, PA January 25, 2012 Date: 8 FEB 2012 07:01:02 +0000 From: "Karina Ramirez" <
[email protected]> Subject: Payroll Info Here is the information you requested on our payroll processing: 1. 2. 3. 4. 5. All hourly employees (clerical and warehouse personnel) are paid biweekly (every 10 workdays) based on hours recorded on time cards maintained by a time clock machine. The time cards are approved by the supervisors. The supervisors take the approved time cards to the payroll department. Salaried employees also are paid biweekly based on a salary schedule approved by the finance committee of the board of directors. All employees are paid every other Wednesday. The personnel department must approve all new hires, terminations, and hourly rate changes. Forms for each of these actions also are approved by appropriate supervisors and are kept in the personnel office. The personnel clerks notify payroll of the changes by a “payroll change” document. The payroll department maintains the individual employees’ payroll records and the forms signed by employees for all pay deductions. Every two weeks, a clerk in the payroll department, sends the payroll data to Roll Pay Payroll Services which prepares the payroll register. Cash is transferred into the Payroll Account from the General Checking Account and employee pay is transferred from the Payroll Account into the employee’s individual accounts through electronic funds transfer (EFT) that same day. Mary Costain, the treasurer, reviews the payroll register compares them to the transfer from the General Checking Account. I think that this should answer all your questions, but if not, just give me a call. Karina Karina Ramirez Director, Internal Audit Apollo Shoes, Inc. This Apollo message (including any attachments) contains confidential information intended for a specific individual and purpose, and is protected by law. If you are not the intended recipient, you should delete this message and are hereby notified that any disclosure, copying, or distribution of this message, or the taking of any action based on it, is strictly prohibited. Processed by Roll Pay Payroll Services, Inc. Apollo Shoes, Inc Employee Payroll Statement 12/28/2011 Two weeks ended Wednesday, December 28, 2011 Warehouse Salaries YTD EE ID Annual Employee Withholding Pay Scale Gross 1005 103,768.80 Hourly 3,991.11 Employer Withholding 6.20% 1.45% 15% 7% Net 3.80% 0.80% 6.20% 1.45% FICA Medicare Fed Tax Maine Tax Pay SUTA FUTA FICA Medicare 247.45 57.87 598.67 279.38 2,807.74 0.00 0.00 247.45 57.87 Total 305.32 1011 127,635.69 Hourly 4,909.07 0.00 71.18 736.36 343.63 3,757.89 0.00 0.00 0.00 71.18 71.18 1013 77,275.53 Hourly 2,972.14 184.27 43.10 445.82 208.05 2,090.90 0.00 0.00 184.27 43.10 227.37 1018 82,016.43 Hourly 3,154.48 195.58 45.74 473.17 220.81 2,219.18 0.00 0.00 195.58 45.74 241.32 1022 85,955.34 Hourly 3,305.97 204.97 47.94 495.90 231.42 2,325.75 0.00 0.00 204.97 47.94 252.91 1023 127,360.26 Hourly 4,898.47 0.00 71.03 734.77 342.89 3,749.78 0.00 0.00 0.00 71.03 71.03 1025 79,650.15 Hourly 3,063.47 189.93 44.42 459.52 214.44 2,155.15 0.00 0.00 189.93 44.42 234.36 1029 94,284.72 Hourly 3,626.34 224.83 52.58 543.95 253.84 2,551.13 0.00 0.00 224.83 52.58 277.41 1031 118,798.65 Hourly 4,569.18 0.00 66.25 685.38 319.84 3,497.71 0.00 0.00 0.00 66.25 66.25 1034 127,361.70 Hourly 4,898.53 0.00 71.03 734.78 342.90 3,749.82 0.00 0.00 0.00 71.03 71.03 1035 79,689.24 Hourly 3,064.97 190.03 44.44 459.75 214.55 2,156.21 0.00 0.00 190.03 44.44 234.47 1037 122,823.75 Hourly 4,723.99 0.00 68.50 708.60 330.68 3,616.21 0.00 0.00 0.00 68.50 68.50 1044 116,722.47 Hourly 4,489.33 0.00 65.10 673.40 314.25 3,436.58 0.00 0.00 0.00 65.10 65.10 1048 130,548.09 Hourly 5,021.08 0.00 72.81 753.16 351.48 3,843.64 0.00 0.00 0.00 72.81 72.81 1055 94,627.47 Hourly 3,639.52 225.65 52.77 545.93 254.77 2,560.40 0.00 0.00 225.65 52.77 278.42 1057 103,424.01 Hourly 3,977.85 246.63 57.68 596.68 278.45 2,798.42 0.00 0.00 246.63 57.68 304.31 1063 125,699.67 Hourly 4,834.60 0.00 70.10 725.19 338.42 3,700.89 0.00 0.00 0.00 70.10 70.10 1069 111,764.49 Hourly 4,298.63 256.32 62.33 644.80 300.90 3,034.29 0.00 0.00 256.32 62.33 318.65 1080 122,065.47 Hourly 4,694.83 0.00 68.07 704.22 328.64 3,593.89 0.00 0.00 0.00 68.07 68.07 1082 121,541.55 Hourly 4,674.68 0.00 67.78 701.20 327.23 3,578.46 0.00 0.00 0.00 67.78 67.78 1084 129,178.44 Hourly 4,968.40 0.00 72.04 745.26 347.79 3,803.31 0.00 0.00 0.00 72.04 72.04 1091 110,736.18 Hourly 4,259.08 264.06 61.76 638.86 298.14 2,996.27 0.00 0.00 264.06 61.76 325.82 1092 168,946.20 Salary 6,497.93 0.00 94.22 974.69 454.86 4,974.17 0.00 0.00 0.00 94.22 94.22 1094 86,215.44 Hourly 3,315.98 205.59 48.08 497.40 232.12 2,332.79 0.00 0.00 205.59 48.08 253.67 1095 108,568.32 Hourly 4,175.70 258.89 60.55 626.36 292.30 2,937.61 0.00 0.00 258.89 60.55 319.44 1096 131,450.01 Hourly 5,055.77 0.00 73.31 758.37 353.90 3,870.19 0.00 0.00 0.00 73.31 73.31 1097 145,018.08 Hourly 5,577.62 0.00 80.88 836.64 390.43 4,269.67 0.00 0.00 0.00 80.88 80.88 1098 128,599.74 Hourly 4,946.14 0.00 71.72 741.92 346.23 3,786.27 0.00 0.00 0.00 71.72 71.72 1099 122,058.51 Hourly 4,694.56 0.00 68.07 704.18 328.62 3,593.68 0.00 0.00 0.00 68.07 68.07 1100 89,699.61 Hourly 3,449.99 213.90 50.02 517.50 241.50 2,427.06 0.00 0.00 213.90 50.02 263.92 1108 88,116.66 Hourly 3,389.10 210.12 49.14 508.37 237.24 2,384.23 0.00 0.00 210.12 49.14 259.27 1110 122,899.41 Hourly 4,726.90 0.00 68.54 709.04 330.88 3,618.44 0.00 0.00 0.00 68.54 68.54 00 96.490.744.00 81.00 66.00 0.00 0.373.40 0.31 5.37 99.234.06 Hourly 4.66 1030 126.25 394.66 74.42 Hourly 3.00 112.19 103.00 0.81 2.447.00 99.00 64.625.973.21 Salary 4.76 2.37 0.41 324.62 303.557.00 0.59 61.76 246.00 124.86 567.09 0.92 226.63 0.56 314.45 Hourly 3.791.67 731.052.00 219.87 671.87 0.95 96.98 59.63 0.86 289.01 0.113.57 314.18 5.326.42 2.821.90 Administrative Salaries 1006 147.60 0.57 3.24 4.00 0.82 1012 185.00 Salary 6.19 1.28 51.58 0.02 313.28 51.38 219.37 1042 235.536.540.78 544.45 340.84 Hourly 3.00 99.71 845.674.302.81 108.941.22 1049 185.43 1.98 442.88 0.54 0.59 0.66 59.91 553.40 313.63 66.41 3.98 278.849.82 691.00 103.00 66.54 307.98 2.488.26 2.660.724.66 177.48 0.05 0.026.19 1014 96.28 270.17 1.40 614.00 74.32 3.02 0.65 525.443.714.00 82.00 114.56 616.863.16 2.83 Hourly 3.472.71 Salary 6.00 0.00 0.317.71 5.049.00 0.66 59.018.00 87.27 Salary 7.056.309.95 1028 133.34 57.82 908.00 87.266.52 2.527.00 224.00 0.523.34 531.544.98 62.80 0.64 0.57 2.37 1.66 0.95 4.63 Hourly 3.19 103.00 0.026.98 468.71 1046 222.00 0.214.925.16 Hourly 4.69 3.28 1007 205.05 0.979.709.61 234.22 99.84 1143 110.00 66.873.00 70.00 124.00 0.880.27 1047 177.715.71 12.00 0.00 5.99 230.463.37 0.58 54.28 851.78 Hourly 3.21 Total 4.75 260.00 0.720.34 270.00 0.43 1026 103.20 0.00 70.00 254.04 0.542.661.575.504.54 264.86 4.62 596.1117 94.82 1033 202.83 2.93 0.98 53.03 5.81 1045 146.235.50 Salary 7.00 0.67 70.05 6.00 0.116.949.00 0.038.00 0.43 122.00 226.80 52.00 70.60 2.66 Hourly 4.27 321.20 0.42 2.067.00 131.00 254.783.842.66 658.344.00 150.28 287.00 0.98 0.595.87 1131 91.00 82.00 0.954.06 1040 178.686.08 549.517.00 246.30 Hourly 4.56 181.00 91.608.00 0.63 1155 106.00 81.64 114.165.509.23 Salary 9.906.51 247.00 74.10 224.98 5.00 0.09 Salary 8.57 616.73 948.53 599.00 0.207.620.79 0.00 0.00 114.31 63.25 6.97 5.41 635.00 70.00 0.046.01 1147 106.21 328.30 1149 119.58 277.63 689.74 Hourly 5.66 3.72 Hourly 4.50 51.73 59.10 0.76 0.77 0.15 5.00 0.61 0.22 397.27 46.465.19 .246.30 Salary 8.31 63.636.098.390.90 0.96 1016 113.00 0.81 1.904.73 59.54 0.23 0.771.00 265.002.00 0.73 91.068.564.00 Hourly 3.465.43 0.00 0.46 423.632.51 1009 114.48 2.96 633.00 64.12 Hourly 4.261.632.00 0.38 1039 95.00 234.473.973.00 108.32 655.00 0.850.00 0.00 91.69 1.21 643.85 Hourly 3.722.98 53.00 246.795.05 305.730.62 133.272.54 0.096.00 112.184.33 Salary 6.00 0.00 0.38 1125 83.13 0.58 0.06 0.00 219.00 0.634.853.560.424.31 296.889.64 1008 126.19 1138 92.69 1038 106.570.11 287.59 61.74 Salary 6.83 Salary 7.02 199.00 0.01 284.49 Hourly 3.88 Hourly 4.99 1127 116.00 265.74 0.192.28 63.37 254.00 0.55 0.54 591.37 478.45 4.42 6.00 0.179.63 0.72 219.00 0.15 3.890.540.71 81.01 0.813.04 341.08 0.00 0.00 0.28 82.95 54.98 59.447.107.842.285.48 0.00 0.63 Hourly 4.237.98 62.34 0.565.02 150.60 482.465.97 0.19 1.00 Salary 6.00 99.23 322.027.118.47 Hourly 5.38 360.490.37 57.27 114.147.71 Salary 7.881.00 0.61 595.00 0.00 0.67 1032 119.00 114.00 122.27 1.14 256.86 224.60 245.82 87.01 558.53 254.00 230.73 1024 219.108.06 247.28 63.00 0.93 1010 157.37 0.00 0.509.00 262.00 0.80 52.32 213.51 729.12 2.550.43 0.55 0.00 0.52 Salary 7.04 Hourly 5.58 543.16 Hourly 4.00 66.00 103.313.37 57.36 Salary 4.51 253.00 103.367.00 0.00 99.46 498.69 112.58 54.22 1.96 479.75 2.59 Hourly 4.53 0.534.46 0.15 0.34 57.45 1020 164.87 1126 103.48 286.50 300.00 0.91 6.116.00 0.45 3.53 498.66 772.125.06 5.120.95 54.82 66.27 124.27 46.56 1133 111.28 530.64 1017 98.49 0.50 51.00 108.438.12 27.00 199.149.00 0.00 0.795.54 0.825.00 0.95 1027 173.00 0.39 262.17 1043 195.00 103.00 0.246.06 0.08 280.17 131.88 253.85 2.87 64.14 3.00 96.00 253.51 70.290.356.64 1.71 8.35 0.185.00 122.30 3.60 0.00 131.067.46 0.97 0.06 278.17 246.95 1.61 303.00 0. 00 613.136.06 194.064.00 0.00 80.30 95.69 0.76 89.69 6.00 0.395.815.00 Salary 63.26 43.00 66.54 0.126.305.844.81 45.61 0.000.06 131.457.785.19 0.00 Salary 42.510.65 1.99 2.17 0.80 63.86 594.750.28 590.00 Salary 50.17 Salary 7.00 920.00 0.896.49 1.31 219.72 58.000.19 0.38 1.08 1.20 180.066.00 0.126.00 0.00 0.00 0.414.00 0.738.728.94 2.10 952.669.06 0.63 0.46 613.23 0.144.510.00 131.84 1067 165.43 605.142.99 44.386.738.519.00 105.734.58 283.679.000.00 0.425.00 920.33 Salary 6.85 691.04 37.00 576.34 0.46 6.19 1310 2.533.34 Hourly 5.307.05 3.00 736.26 43.261.74 659.439.60 0.81 8.00 0.00 0.15 7.71 0.36 307.85 537.52 Grand Total 20.00 0.00 Salary 7.19 1078 138.084.08 0.00 0.91 102.04 211.00 0.35 111.00 Salary 9.00 75.53 4.00 0.90 250.00 194.96 0.851.00 0.00 102.81 45.00 388.54 319.24 188.141.99 118.493.37 77.600.00 1.32 0.000.35 0.310.00 Total 16.654.44 127.29 3.518.00 0.124.24 213.20 0.61 496.59 Salary 3.086.00 0.320.00 Salary 105.00 92.210.99 194.579.00 234.84 784.00 131.974.00 95.00 0.97 0.74 169.76 19.748.37 1081 114.76 Hourly 5.10 1070 118.00 122.031.00 108.782.435.86 Salary 4.862.83 0.72 3.33 0.865.193.77 632.414.23 0.35 0.397.84 75.336.52 366.769.00 77.390.097.69 1.31 1.72 58.868.1050 214.46 0.74 105.00 77.00 0.14 0.95 Salary 8.00 0.65 11.28 11.93 0.00 187.53 1060 1061 119.674.64 .00 0.04 1.12 55.66 0.961.917.00 0.572.615.94 0.00 0.15 2.90 1.44 0.63 Salary 2.314.35 1.71 Salary 6.00 0.151.20 233.72 536.00 0.82 5.24 8.213.00 127.06 1.31 48.00 194.80 Salary 8.00 66.98 Salary 6.00 0.862.10 92.71 Hourly 3.32 0.00 0.41 373.25 Salary 7.44 1.000.591.30 985.00 0.00 0.00 0.49 239.37 1089 119.70 3.90 108.00 0.84 0.86 0.00 0.85 38.28 90.00 0.00 66.39 0.190.87 0.77 0.50 Salary 8.00 111.38 3.966.769.00 0.654.00 Salary 7.00 613.863.65 11.59 844.00 0.742.19 920.289.89 289.33 6.043.55 322.00 108.89 460.38 615.90 1088 81.49 45.854.00 0.225.00 81.789.88 4.00 0.00 68.45 3.00 66.00 0.626.91 1.55 219.33 0.704.36 1065 135.00 0.00 0.44 1141 144.265.47 1087 195.60 1077 79.00 111.553.00 3.918.85 0.62 4.90 108.43 197.90 1.00 0.04 1054 78.663.71 54.82 Salary 1058 160.38 0.106.23 Hourly 4.00 92.02 393.27 4.54 0.561.43 832.100.00 0.00 80.81 0.00 111.07 5.30 1073 647.68 Salary 7.61 329.22 42.15 0.57 0.00 0.07 0.00 0.00 0.00 0.24 460.00 0.74 Salary 24.206.85 66.79 231.00 0.08 139.21 1119 219.29 0.00 108.00 0.90 3.79 671.148.17 1071 170.27 Salary 3.29 0.79 453.34 4.00 0.983.15 736.529.46 6.24 8.44 7.00 139.532.00 0.64 309.42 2.50 Salary 1056 81.318.99 44.00 102.433.76 928.62 0.70 5.31 1121 228.00 8.64 606.65 1330 BoD Stipend 235.70 5.00 1074 199.233.650.49 45.00 0.581.00 0.461.00 139.00 89.83 2.31 122.53 1083 184.307.43 387.19 9.20 457.07 2.00 361.12 0.346.04 1076 98.00 119.00 0.13 0.00 0.54 32.00 0.00 75.84 264.114.048.693.00 0.11 4.940.97 0.355.00 122.99 787.245.65 15.00 1052 199.403.00 0.21 68.533.42 Salary 9.06 449.08 105.00 81.00 0.75 0.59 249.563.33 Hourly 4.18 0.76 444.24 6.38 7.442.51 525.058.85 80.44 0.43 80.679.00 0.45 0.00 0.85 1090 1.230.00 0.33 160.36 Hourly 4.00 160.526.254.88 0.351.56 471.00 0.00 89.00 1.144.261.17 66.00 0.00 0.197.00 68.756.37 800.00 0.71 54.974.23 0.38 119.15 1280 1.342.46 1107 122.04 111.93 0.59 2.03 1053 195.003.610.748.020.235.259.00 127.111.80 63.25 187.658.49 470.21 705.93 Salary 0.91 1085 67.00 0.51 525.00 361.439.59 81.00 188.03 Salary 5.08 1059 146.53 5.18 Hourly 5.58 433.438.887.546.35 Hourly 4.54 0.99 19.302.00 108.94 0.17 684.08 5.297.56 240.878.00 95.60 234.954.89 567.00 111.00 0.66 0.12 0.00 736.43 1163 1.00 361.00 2.782.038.04 0.04 37.00 0.38 2.533.23 4.00 250.240. . we can feel pretty good about the revenue that was confirmed in the accounts receivable testing (C-series). for the payroll taxes. double-check the board of directors’ minutes for explanations of fluctuations. 2. For example. 3. Cost of Goods Sold should remain relatively constant as a percentage of sales. The last thing that we have to do is to look at revenues (R-1) and expenses (X-1). Has interest expense been accrued? . things are coming to a close. unless suppliers’ costs have gone up or sales prices have changed. compare last year’s numbers as a percentage (ratio) of payroll expense and compare to this year’s ratio. The same should be true for freight and warranty expenses. Other information: a. I think postage and phone expenses are down from last year. We can tie down most of the numbers from the work that we have done previously. Legal expense was confirmed directly in the attorney’s letter.Date: 9 FEB 2012 11:27:00 +0000 From: "Darlene Wardlaw" <DW@aow. They should be comparable to last year’s numbers compared to sales.cpa> Subject: Revenue and Expenses Well. For example. Use analytic procedures on returns and warranty expense to make sure that they are reasonable. For expenses that we have not examined already: 1. Have they recorded our fee for the 2011 audit? c. For example. For those expenses subject to management discretion. Use analytic procedures for those that should be comparable to those in the previous year. d. With Apollo’s extensive use of e-mail now. b. I know that the company severely cut back on Research and Development during the current year. 128.053.000.497.20) ($13.455.281.00 $2.158.89) 42000 Warranty Expense ($1.918.00 $240.46 $0.213.Apollo Shoes.00 $1.44 Unaudited Balance 12/31/2011 $245.302.583.089.600.76 $230.48) ($1.29 Acct # Account Title 40000 Sales Net Sales 45000 Income from Investments 46000 Interest Income 47000 Miscellaneous Income Comments .172.074.779.426.31 $204.47) $240.100.145.881.220. Inc.452.81 $131.158.356.52 $0.88 41000 Sales Returns ($4.575.103.57 $234. Schedule of Revenues For Year Ended 12/31/2011 R-1 Prepared by Reviewed by PBC (Audited) Balance 12/31/2010 $246. 000.365.642.06 $1.09 60000Advertising Expense $897.383.106.27 $24.599.46 $4.989.000.951.92 $61.Federal 78510Income Tax Expense .603.334.00 $446.00 $236.45 67000Bad Debt Expense $1.56 $80.82 72000Payroll Tax Exp $1.023.302.State 89000Other Expense Comments .00 $0.502.78 $52.61 $17.000.263.870.00 74000Rent or Lease Expense $2.Apollo Shoes.43 $875.902. Inc.569.425.00 68000Insurance Expense $853.00 $2.99 $0.993.45 66000Legal and Professional Expense $3.87 $1.000.04 $49.26 57500Freight 62000Research and Development 64000Depreciation Expense 64500Warehouse Salaries 65000Property Tax Expense 70000Maintenance Expense 70100Utilities 70110Telephone Expense 70120Postage Expense 71000Miscellaneous Office Expense 77500Administrative Wages Expense 78000Interest Expense 78500Income Tax Expense .82 $4.212. Schedule of Expenses For Year Ended 12/31/2011 X-1 Prepared by Reviewed by PBC Acct # Account Title 50000Cost of Goods Sold (Audited) Balance 12/31/2010 Unaudited Balance 12/31/2011 $141.974.98 $16.99 $137.02 $128.645.629.305.577.225.00 $3.992.26 $4.00 $4.00 $429.502.172.61 $130.622.00 $10.00 $16.033.574.85 73000Pension/Profit-Sharing Plan Ex $3.000.140.495.203.87 $135.58 $183.18 $76.246.80 $31.407.000.01 61000Auto Expenses $208.000.133.715.485.39 $214.000.550.942.01 $986.633.224.332.65 $36.332.605.373.44 $133.96 $4.720.000.000.21 $77.221.000.136.17 $543.000.50 $2.875.736.32 $84.811.591.891.236.00 $19.197.854.000.803.300.00 $2. 743.118.483.00 $7.000.64 $22.118.270.00 $0.483.743.105. Inc.483.483.00 $22.105.000.64 $0.00 39005Retained Earnings $6.270.64 .Apollo Shoes.64 $6.000.00 39004Paid-in Capital $7. Stockholders' Equity Lead Schedule For Year Ended 12/31/2011 Q-1 Prepared by Reviewed by PBC Acct # Account Title 39003Common Stock (Audited) Balance Net Income/ 12/31/2010 Additions $8.000.00 Repurchases/ Dividends Unaudited Balance 12/31/2011 $8. An explanation of the reasons subsequent events must be disclosed in the financial statements even though they occurred after the balance sheet date. DW . 3.Date: 11 FEB 2012 11:27:00 +0000 From: "Darlene Wardlaw" <DW@aow. should be performed as part of the subsequent event audit work. didn’t it? Hope you didn’t run into too much trouble when you crossed the picket lines. I’ve attached the last set of minutes from Apollo’s Board of Directors. stating all details that should be disclosed. in addition to verbal inquiry and the client’s representation letter. Discuss the accounting and/or disclosure. if any. Include the following in your memo: 1. I’ve also attached the letter that we received from Apollo’s attorney. 2. Include in your explanation the difference between the disclosure of Type I and Type II subsequent events.cpa> Subject: Subsequent Events Well this audit turned out to be a little more interesting than we initially expected. You need to prepare a memo (to be placed in the A series with the financial statements) on these subsequent events and how you believe we should address them. Give the audit procedures that. you would recommend for the subsequent events discussed in the minutes. presided over the second meeting of the year.M. all the remaining workers went on strike. Secretary . chairman of the board. beginning at 3 P. presented a proposal for building and marketing custom-made PrivyShoes. To date the strike is unsettled. 2012 Larry Lancaster. Eric Unum reported on Mall-Warts bankruptcy proceedings. Meeting ended 7:30 P.M. Since a plan to build and market similar shoes for marathon runners had not been successful. Plans were discussed to increase sales to Apollo’s other customers. Apollo’s top 2 salesmen. In the meantime.MEETING HELD FEBRUARY 9. operations activity was curtailed in mid-January and some workers were laid off. On February 8. All members were present: Larry Lancaster Josephine Mandeville** Ivan Gorr* Horstmann** Harry Baker* Fritz Brenner** Theodore Eric Unum * Outside director ** Outside director and member of the audit committee. No further information was available. The minutes of the January 3 meeting were reviewed and approved. /s/ Jeff Chesnut. Sue Fultz reported that depositions were ongoing in the litigation action discussed at the January 3 meeting. Saul Panzer and King Stout. the board tabled the proposal for the time being. Sales have decreased significantly as a result of the loss of Apollo’s largest customer. as a result of reduced sales. a novelty item for water skiers. if the plaintiff is successful. the damages awarded may be substantial.000. specifically the 1st Annual Swiss Aquatic Games held in January 2011. Also. Esq. While we believe the plaintiff will have serious problems establishing Apollo’s liability. The action stems from the use of one of the Company's products (the Spotlight) in an aquatic environment. While the remaining case is in the preliminary deposition stage. While the company intends to vigorously defend itself in this action. . immersion of the company’s products in water allegedly caused severe electrical shock to the wearer(s).224. resulting in no legal liability.000 in services which we performed prior to December 31.000.902. I will try to provide details of the litigation below: On January 2. a class action suit alleging gross negligence and violation of implied warranty of merchantability was brought against Apollo for $12.224. The action involves unique characteristics wherein authoritative legal precedents bearing directly on the plaintiff’s claims do not seem to exist. Please feel free to contact me should you have any additional questions on these matters. With respect to this client.000 was already paid as December 31. purportedly resulting in numbness in the extremities and loss of all leg hair. Inc. 2012. Perley Stebbins Perley Stebbins. Two cases were ultimately dismissed during 2011.000 after legal fees are considered. 2011. Sincerely. CPAs. We intend to bill these services within the next week.45 of our billed amount remains unpaid at December 31. During the athletic competition.000. we have an additional $3. my firm was engaged to litigate three cases. 2011. ME 00001 Dear Sir or Madam: I write to respond to your letter of audit inquiry regarding Apollo Shoes.902. 2012 Anderson. Our billed legal fees in 2011 amounted to $4.Perley Stebbins. of which $3. LLC Augusta Bangor Jay Shoetown February 11. Therefore $1. it is reasonably possible that the loss could reach $10. LLC Shoetown.000.45.000. and Watershed. Olds. 2011 but have not yet billed. Esquire Lawyers “R” Us. Include all the required items and any additional points you think are necessary based on the following (see SAS 85. or agreements to repurchase assets previously sold. & Watershed from Apollo’s CEO and CFO. The letter is to be addressed to Anderson. All material adjustments have been made to the financial statements. There is one legal matter covered in the attorney’s letter which has been received. There are several subsequent events that the client had disclosed to you. we draft the letter. There are no capital stock repurchase options.cpa> Subject: Management Representation letter You need to draft a proposed management representation letter to be prepared on Apollo’s letterhead stationery for Arnold to review when he returns. AU 333): We know of no frauds or violations of laws by either management or employees. Remember. Olds. management has to sign it. DW . You can find a copy in last year’s 10-K. You need to also draft the management certification statement required by Sarbanes-Oxley. He will also have to be the bearer of the bad news --.Date: 16 FEB 2012 07:15:25 +0000 From: "Darlene Wardlaw" <DW@aow. compensating balances.all the adjustments that we have found. That will be Arnold’s job – to get them to sign the letter. Review the search for unrecorded liabilities audit work for possible adjustments. To wrap up the workpapers. b. a. Arnold will fight hardest for the adjustments that will materially affect the financial statements. you need to do the following tasks: 1. Review the liabilities audit work for possible adjustments. 2. While we will tell them of everything that we have found. e. Adjust the income tax expense to reflect an income tax rate of 40 percent for all income (and set up a corresponding income tax payable or receivable). Propose the adjustments to the financial statements you believe necessary for Arnold to give the standard unqualified report on the Apollo Shoes financial statements. Review the property.) c. Prepare a “scoresheet” working paper for the proposed adjusting journal entries. (Be careful to determine the proper accounts for adjustment when inventory is included or excluded from the physical count and compilation. The tax return and financial statement income are identical. . it will be their responsibility to make or not make the entries. When the previous recorded inventory was adjusted to match the physical count. “Included” means that the inventory cost is already in the general ledger balance shown in the trial balance. and equipment and prepaids audit work for possible adjustments. f. The tax department “codeheads” will take a closer look when they prepare the corporate returns. Review the findings about subsequent events and propose adjusting journal entries if any. Review the Apollo cash audit for possible adjustments. g. so there are no deferred or prepaid income taxes resulting from timing differences.cpa> Subject: Apollo Adjusting Entries Well we are nearing the end of the Apollo Shoes engagement. 3. Remember to keep materiality in mind. Review the findings from the various expense analyses and your proposed adjusting journal entries. d. if any. the adjustment was to cost of goods sold.Date: 18 FEB 2012 10:02:09 +0000 From: "Darlene Wardlaw" <DW@aow. plant. determine (calculate) the auditor’s “range of reasonableness estimate. Has Apollo reserved an appropriate amount for potential obsolescence in its inventory? Is there inventory that has little or no marketable value? Warranty Expense. The company acquired and placed in service new equipment during the year. for periods specified by company policy. Has Apollo reserved an appropriate amount for warranty expense? Have the amounts (especially as a percentage of sales) been stable or changed significantly? Write a brief one-page memo analyzing management’s estimates described above to put in the Aseries workpapers.cpa> Subject: Analysis of Accounting of Apollo Estimates I forgot to include this in my last e-mail: The company incorporated several estimates in its current year financial statements. I know that Apollo uses at least three estimates that affect bottom line numbers: Allowance for Doubtful Accounts Receivable. taking the proposed adjustments into account. . and (2)income in the adjusted financial statements. The audit objective is to determine whether the estimates contribute a material bias to the measurement of income.” Do the company’s estimates produce a bias toward overstatement or understatement of income (before income taxes and after income taxes)? Explain the relative size of the bias amounts in comparison to (1)income in the unaudited financial statements. Has the company reserved enough for uncollectible accounts? Depreciable Assets. SAS 99) require consideration of individual estimates and consideration of all estimates taken together. with zero salvage. I made him promise to throw a nice endof-audit party when we are done. Auditing standards (specifically. I have kept Arnold posted on what is going on at Apollo. Are the useful lives appropriate and salvage values reasonable? Inventory Obsolescence.S. DW P. For each one. Depreciation was calculated on a straight-line basis.Date: 18 FEB 2012 10:15:35 +0000 From: "Darlene Wardlaw" <DW@aow. Identify information you believe should be included in notes to the financial statements. All of these workpapers should be in the A-series workpapers. they will come out of it and be able to pay Apollo the amounts owed. 00:42:35 +0000 From: "Darlene Wardlaw" <DW@aow. Also. 2011. or methods of strengthening their internal controls. Arnold spoke with Larry Lancaster about your proposed adjustments in a four-hour meeting. They (Apollo) admitted they missed some adjustments at the end of the year and have (grudgingly) agreed to make all of the entries except the ones related to the Mall-Warts account (i. 1. 3. you may want to draft any management letter comments on anything you believe Apollo Shoes can do better from an operational economy and/or efficiency perspective.cpa> Subject: Drafting Financial Statements Well.Date: 24 FEB 2012. we want to maintain our professionalism. 2011 assuming Apollo doesn’t adjust sales and accounts receivable for the questionable December sale. DW . including the questionable December sale. Prepare the balance sheet as of December 31.e.. Even though we do not intend to be Apollo’s auditor next year. 4. Larry is arguing that even though Mall-Warts is in bankruptcy. Apollo’s management is responsible for them. 2011. Prepare a cash flow statement for the year ended December 31. Draft the notes. You can use last year’s as a guide. those related to the December sale and any adjustment to the Allowance for Doubtful Accounts).) 2. and the income statement for the year ended December 31. (Remember that even though we are drafting the statements. Arnold and I disagree. Date: 29 FEB 2012 06:14:29 +0000 From: "Darlene Wardlaw" <DW@aow. 2. 5. 2012). 4. You should date the report as of the end of fieldwork next week (March 7.cpa> Subject: Drafting the audit report One last thing to do and then we can wash our hands of the whole thing. 3. so we will probably need to refer to the “other auditors” who audited the previous year’s financial statements. What do you think about a going-concern disclosure? We will probably need a memo in the workpapers (A-series) addressing this issue and discussing the reasons why we should or shouldn’t give them a going concern paragraph. You need to draft an audit report to go with the financial statements you drafted (put it in the A-series workpapers). 1. Any subsequent events that need disclosure? . Remember that we didn’t audit Apollo last year. Adjust the report to reflect the fact that Apollo didn’t adjust its accounts receivable/allowance/sales for the Mall-Warts problems.