Apollo Shoes – Detailed Outline

Overview

To help you with your SPAP (Critical Assignment), you will complete and submit a Detailed Outline discussing the fluctuations of three “main accounts” in relation to at least one additional “related account” per relationship. Specific instructions and requirements are included in the template file.

The Detailed Outline should be an outline of words, thoughts, phrases, and short sentences. You should not include long sentences or paragraphs in an outline format. You may include information, analysis, and evidence in the Detailed Outline that you do not include in your final SPAP assignment.

You can also add additional evidence, arguments, and support as you continue in the analysis and writing process. In other words, once you complete your outline, you can add to it or take away from it anything you need to in order to write a high-quality final SPAP Critical Assignment deliverable.

This assignment will allow you to utilize audit procedures to collect, examine, and perform an initial evaluation of audit information and evidence. You will also utilize and create work papers in an organized, clear, and concise format appropriate for a real-world audit engagement.

To do this, use the information found in:

The Apollo Shoes Client File,

Previous assignment deliverables submitted as well as the feedback received in this series of assignment

Required

Prepare a Detailed Outline of your initial analysis of the fluctuations using the Excel spreadsheet file (.xlsx) template provided.Note: It may be easier to write your analyses in Word and then copy/paste them into the textboxes in the Excel file.RequirementsRead: All audits require reading and research.  Do the following:

Review the Planning and Internal Controls sections of the Apollo Shoes Case Study (Client File). Note any policies and procedures, BOD activity, and other information relevant to the Fixed Assets section of the audit.

Read the Fixed Assets section of the Apollo file.

Since we are in the fieldwork portion of the audit, you are no longer limited to only the Planning and Internal Controls sections of the audit.  You now have access to all of the documentation in the Client file.

Name:
Semester:
Year:
Course Number:
Section Letter:
Professor:
Certification:
ACC470
Include your full first and last name as shown in Blackboard
Include the 2-letter semester of this course (Sp, Su, Fa)
Include the 4-digit year of this course
Include the course number assigned by the university
Include the section letter assigned by the university (A, B, etc.)
Include the name of the professor teaching this course
By typing my name above and submitting this file, I, the student named above, certify that I completed this
assignment through my own work and efforts. I certify that this course deliverable, which I submitted, is my
own work and is in compliance with all course and University standards for Academic Integrity as indicated
in the Syllabus and the Student Handbook.
Apollo “Detailed Outline” Assignment
In this assignment, you will continue working on the Critical Assignment by preparing a Detailed Outline of the
documentation required by the Selected Preliminary Analytical Procedures (SPAP). Your audit manager has
already organized the workpapers and completed the planning materiality worksheet.
Getting Started:
1) Familiarize yourself with the file. Read the planning materiality memo (A-5) from your team member (Taylor
Crump), then read the steps in the audit program (work paper B-0) and familiarize yourself with work paper B-1.
2) Identify and brainstorm your discussion/rationale for your proposed adjustments to materiality (A-5). Use the
new materiality threshold you proposed on A-5 as your threshold in identifying the main accounts you analyze in
this assignment.
3) Complete Steps 1, 2, 3 as required by the audit program (B-0). Be sure to document your work using the
designated tickmarks. The tickmark legend is located at the bottom of each work paper.
4) Work on Steps 4, 4a as required by the audit program (B-0). You will brainstorm and document your thoughts
and ideas on workpaper B-1.
5) When you are finished with your work, enter your initials in the box in the top right marked “Prepared By” on
This entire completed workbook should be renamed per the Naming Convention provided in the Blackboard
instructions.
Apollo Shoes, Inc
Trial Balance (Audited)
12/31/20×6
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
47000
50010
57500
60000
61000
62000
64000
Account Description
Cash on Hand
Regular Checking Account
Payroll Checking Account
Savings Account
Accounts Receivable
Allowance for Doubtful Accounts
Inventory – Spotlight
Reserve for Inventory Obsolescence
Prepaid Insurance
Prepaid Rent
Office Supplies
Notes Receivable-Current
Other Current Assets
Land
Buildings and Land Improvements
Machinery, Equipment, Office Furniture
Accum. 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
Miscellaneous Income
Cost of Goods Sold
Freight
Advertising Expense
Auto Expenses
Research and Development
Depreciation Expense
PBC
A-1
Debit
1,987.28
198,116.52
3,044,958.13
16,410,902.71
18,825,205.24
743,314.38
200,000.00
7,406.82
117,000.00
623,905.92
433,217.10
572,691.08
53,840.59
4,497,583.20
1,100,281.48
141,569,221.61
4,302,951.46
897,140.01
208,974.39
31,212,334.17
133,000.00
Credit
1,262,819.88
3,012,000.00
164,000.00
4,633,118.09
29,470.32
1,318.69
583.99
6,033.01
2,815.47
1,318.69
583.99
10,000,000.00
8,105,000.00
7,423,000.00
2,219,120.65
246,172,918.44
204,302.81
–
Debit (Credit)
X-Ref
Apollo Shoes, Inc
Trial Balance (Audited)
12/31/20×6
Account ID
64500
65000
66000
67000
68000
70000
70100
70110
70120
71000
72000
73000
74000
77500
78000
78500
78510
80000
Account Description
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 – Federal
Income Tax Expense – State
Loss on Legal Settlement
Total
PBC
A-1
Debit
4,633,383.82
80,495.32
3,605,133.96
1,622,425.99
853,942.65
61,136.04
135,642.99
76,373.78
128,033.21
17,023.27
1,550,989.06
3,000,000.00
2,603,485.87
16,875,305.98
875,000.00
2,365,000.00
429,000.00
19,172,000.00
283,238,404.03
Credit
283,238,404.03
Debit (Credit)
X-Ref
Apollo Shoes, Inc
Preclosing Trial Balance
12/31/20×7
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
78600
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, Equipment, Office Furniture
Accum. 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
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 – Federal
Income Tax Expense – State
Controllers’ Clearing Account
Total
PBC
A-2
Debit
2,275.23
557,125.92
3,645,599.15
51,515,259.98
1,250,000.00
67,724,527.50
3,424,213.78
8,540.00
117,000.00
674,313.92
2,929,097.13
1,998,780.39
53,840.59
11,100,220.89
1,158,128.47
130,196,645.26
4,240,263.09
1,036,854.01
210,502.80
528,870.44
446,000.00
4,720,715.56
99,332.45
4,913,224.45
36,106.92
35,502.87
137,332.18
52,599.02
77,803.61
24,891.82
1,577,811.85
3,630,375.80
1,206,574.00
16,197,225.43
2,591,736.50
8,900,000.00
3,100,000.00
330,119,291.01
Credit
1,239,009.75
846,000.00
610,000.00
1,922,095.91
8,439.65
11,414.99
118,086.12
55,106.86
8,439.65
11,414.99
44,403,000.00
12,000,000.00
8,105,000.00
7,423,000.00
6,590,483.64
242,713,452.88
1,426,089.31
131,881.46
2,166,000.00
330,375.80
330,119,291.01
Debit (Credit)
X-Ref
Apollo Shoes
ENGAGEMENT MATERIALITY
(Required for all engagements)
CLIENT:
PERIOD ENDED:
A-5
Prepared by TC
Reviewed by AA
Apollo Shoes
12/31/20×7
This completed form must be provided to the engagement quality control reviewer in the planning stage of every
audit.
PLANNING MATERIALITY CALCULATION
Only if the current year net income (loss) (or other measure) is significantly different from
the entity’s historical results would 2-year averaging to obtain normalized net income (loss)
(or other measure) be appropriate.
PROFIT ORIENTED ENTITIES
Net income (loss)
Plus (Minus): unusual, non-recurring
revenues and expenses, and extraordinary
items:
1) [List account number, account name]
2) [List account number, account name]
3) [List account number, account name]
ADJUSTED NET INCOME (LOSS)
Adjusted net income (loss) multiplied by:
5.0%
TOTAL ASSETS
Current Year
50,549,082
Prior Year
4,371,363
50,549,082
4,371,363
2,527,454
218,568
Current Year
131,205,564
Prior Year
36,793,726
1,312,000
368,000
Current Year
234,179,074
Prior Year
240,779,357
234,179,074
240,779,357
2,341,791
2,407,794
Total assets multiplied by:
1.0%
TOTAL REVENUES
Plus (Minus): unusual, non-recurring
revenues
1) [List account number, account name]
2) [List account number, account name]
3) [List account number, account name]
ADJUSTED REVENUES
Total adjusted revenues multiplied by:
1.0%
JUSTIFICATION OF PLANNING MATERIALITY
1. Financial data source (i.e. actual,
budget, projection):
Year end trial balance, actual data obtained from client.
2. Basis (i.e. normalized net income,
revenue, total assets, other):
Adjusted net income
Justification:
Consistent with firm policy, we conclude adjusted net income is the
appropriate basis for profit based entities such as Apollo Shoes, unless
unusual circumstances exist. There do not appear to be any unusual
circumstances for Apollo, therefore we will use adjusted net income.
Consistent with firm policy, we conclude adjusted net income is the
appropriate basis for profit based entities such as Apollo Shoes, unless
unusual circumstances exist. There do not appear to be any unusual
circumstances for Apollo, therefore we will use adjusted net income.
3. Percentage of financial data source
used:
Standard 5% used.
4. Amount selected (planning
materiality)
2,527,454
5. Prior year’s final materiality
N/A
6. Performance materiality/Tolerable
misstatement (75% of planning
materiality)
New client
1,895,591
7. Listing scope (amount threshold for
suggested adjustments) (using 5% to 10%
of planning materiality based on expected
level of adjustments is usually
appropriate)
5.0%
126,373
Engagement Partner
A. Anderson
Engagement Quality Control Reviewer
Ernest Olds
Color Legend:
Update with client information
Use for testing materiality
Materiality Instructions (for the Detailed Outline Assignment):
The instructions for the Critical Assignment are included in this tab beginning in Column I. That information is
included for informational and reference purposes only.
Begin to analyze the materiality calculation performed on A-5, above. Specifically, analyze the reasonableness of
the “Justification” narrative provided beginning on line 50.
Propose at least one adjustment to the materiality calculation (lines 18-20) to improve its appropriateness.
Below, brainstorm about the rationale to justify the proposed adjustment(s) to the materiality calculation. In your
final discussion in the Critical Assignment, you must include rationale to support “why” the adjusted materiality
amount provides a more appropriate or a more reasonable level of materiality at the planning stage of the audit.
Include this type of rationale here in your brainstorming document.
-Include short thoughts or bullet points.
-Remember: Your outline does not need to be complete or perfect. It is a starting point.
-You should include 2 or more thoughts/bullets for each proposed adjustment to materiality.
-Keep in mind: Your explanation in the Critical Assignment needs to include a legally defendable level of evidence.
Begin developing this level of rationale here in this assignment.
Use your newly proposed materiality amount (cell C67) for the materiality threshold dollar value in Step 4a of B-0.]
Discussion and rationale for adjustments to the materiality calculation (for the Detailed Outline):
Item 1): [The first adjustment (line 18): Begin brainstorming and writing down the ideas you may want to include
for your discussion and rationale here.]
Item 2): [The second adjustment (line 19): Begin brainstorming and writing down the ideas you may want to
include for your discussion and rationale here.]
Item 3): [The third adjustment (line 20): Begin brainstorming and writing down the ideas you may want to include
for your discussion and rationale here.]
Materiality Instructions for the Critical Assignment (included here for reference purposes ONLY):
Analyze the materiality calculation performed on A-5, above. Specifically, analyze the reasonableness of the
“Justification” narrative provided beginning on line 50.
Propose at least one adjustment to the materiality calculation (lines 18-20) to improve its appropriateness.
Below, provide discussion and rationale to justify the proposed adjustment(s) to the materiality calculation. In your
discussion include rationale to support “why” the adjusted materiality amount provides a more appropriate or a
more reasonable level of materiality at the planning stage of the audit.
-Keep in mind: Your explanation needs to include a legally defendable level of evidence.
Use your newly proposed materiality amount (cell C67) for the materiality threshold dollar value in Step 4a of B-0.]
Discussion and rationale for adjustments to the materiality calculation for the Critical Assignment (included
here for reference purposes ONLY):
Item 1): [The first adjustment (line 18): Begin writing your discussion and rationale here.]
Item 2): [The adjustment adjustment (line 19): Begin writing your discussion and rationale here.]
Item 3): [The third adjustment (line 20): Begin writing your discussion and rationale here.]
Apollo Shoes, Inc.
AUDIT PLAN—Preliminary Analytical Procedures
FYE 12/31/20×7
Step
1
Description
Complete engagement materiality memo.
B-0
Workpaper
Related
Reference Assertion (s)
A-5
Performed
by
TC
Comments
[Analyze the materiality calcuation performed on A-5.
Recommend at least one adjustment to the materiality
calculation to improve its appropriateness.
Additional instructions are included on A-5.]
2
Obtain 20×6 audited trial balance and 20×7 unaudited trial balance.
Create Preliminary Analytical Procedures (PAP) workpaper that
calculates the dollar and percentage change over the prior year for
each line item.
3
Cross reference all balances on PAP workpaper to TBs and foot
amounts.
4
Investigate all fluxes which are:
1) percentage change > 10%, and
2) over “Listing Scope” (see A-5).
4a
Select three (3) main accounts with important fluxes in related
accounts as noted on the SPAP, and include them on the deliverable
for your senior to review. For each main account identified, discuss
and explain one hypothesis that could be driving the flux of the
main account. The hypothesis should be supported by information
and/or documentation within the Client File.
[You already completed this in a previous assignment.
Either complete it again or copy and paste your work into
this work paper.]
[You already completed this in a previous assignment.
Either complete it again or copy and paste your work into
the appropriate work papers.]
[You will select only three (3) fluxes to investigate (see
Step 4a). However, the analysis for all fluxes meeting the
thresholds would need to be completed in an actual audit.]
[Additional instructions are included on B-1.]
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
Apollo Shoes, Inc
Comparative Trial Balance
Audited
20×6
(Audited)
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, Equipment, Office Furniture
Accum. 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
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
B-1
Prepared by
Reviewed by
Unaudited
20×7
(Unaudited)
Raw Change
(CY-PY)
Percent Change
(Raw Change/PY)
T/M
E
E
E
E
71000
72000
73000
74000
77500
78000
78500
78510
78600
80000
Miscellaneous Office Expense
Payroll Tax Exp
Pension/Profit-Sharing Plan Ex
Rent or Lease Expense
Administrative Wages Expense
Interest Expense
Income Tax Expense – Federal
Income Tax Expense – State
Controllers’ Clearing Account
Loss on Legal Settlement
Total
Tickmark Legend:
f – Footed without exception
i – Amount is considered immaterial (< materiality threshold determined on A-5), no further work necessary. TB - Agrees to Trial Balance without exception PY - Agrees to prior year audited Trial Balance without exception Selected Preliminary Analytical Procedures Instructions (for the Detailed Outline): NOTE: The instructions for the Critical Assignment are included in this tab beginning in Column N. Those instructions are included for informational and reference purposes only. First, work on the materiality analysis on A-5. This is your starting point as you will use the newly proposed materiality threshold as the basis for selecting accounts fo r your fluctuation analysis. Link your proposed materiality amount from A-5 to B-1 in the designated area below for easy reference. Second, work on the fluctuation (flux) analysis. For this workpaper you will choose three (3) accounts that meet the materiality flux threshold for preliminary analysis. These will be the “main accounts” you analyze. While many firms use numbered tickmarks like you saw in in the “Comparative Trial Balance” Assignment, we will use lettered tickmarks for this assignment. Use tickmarks A, B, and C, ordered sequentially, for the main accounts you select. For each main account, begin to identify other accounts on the TB with which the main account has a relationship based on your knowledge of accounting cycles and/or information provided in the client file. Each main account should be evaluated in relation to at least one additional “related account” (minimum of two accounts for each relationship discussed). -All related accounts should be identified with the same tickmark. -Each tickmark should be next to two or more identified accounts. For each of the three main accounts you chose, there is a section designated in the template called “Accounts Related to Tickmark [x]: ” where you will begin working on the analysis. In each section: -For the main account, copy and paste the main account information first as shown on the template. -For each related account, copy and paste the related account information under the main account line. This will make it easy to see the information and potential relationships in the flux. Place lettered tickmarks next to the accounts in both areas: -Trial Balance (line 8-76) -“Accounts Related to Tickmark [X]:” The Critical Assignment asks you to hypothesize at least one significant reason we see the flux we see in the main account. We will begin that analysis in this assignment. To do this, use your knowledge of GAAP, accounting cycles, information provided in the client file, and your business acumen. Brainstorm about the reasons for the flux in the main account. -Include short thoughts or bullet points. -Remember: Your outline does not need to be complete or perfect. It is a starting point. -You should include 3 or more thoughts/bullets for each tickmark. -Discuss all the other accounts (by name) you included in the list to help explain the fluctuation. -Keep in mind: Your explanation in the Critical Assignment needs to include a legally defendable level of evidence. Begin developing this level of rationale here in this assignment. In your brainstorming activity, use information provided in the client file including, but not limited to, documentation, BOD minutes, previous 10-K filings, etc. You may also perform additional calculations to support your thoughts and ideas. Beginning below, you will find an example. It is called “Accounts Related to Tickmark E:” and it is related to the flux of Accounts Receivable (tickmark E). It is provided as an example to give you an idea of the level of documentation and analysis expected in this assignment. It includes various components including the account information, Beginning below, you will find an example. It is called “Accounts Related to Tickmark E:” and it is related to the flux of Accounts Receivable (tickmark E). It is provided as an example to give you an idea of the level of documentation and analysis expected in this assignment. It includes various components including the account information, additional calculations, and bulleted brainstorming thoughts and ideas to support the reasons for the flux in Accounts Receivable. Note: We DO NOT assume fraud or intentional wrong doings in our tickmark discussions. Any potential errors or misstatements are assumed to be "innocent" and unintentional. There may be a risk of fraud, but we do not accuse a client of fraud without solid evidence, especially at the Planning Stage of an audit when we are only looking at relationships and not performing substantive testing. Accounts You May NOT Select: You may NOT select the following accounts for the main account of your analysis as most transactions within the accounting cycles eventually “pass through” one or more of the accounts listed below. For the same reason, generally, these accounts should not be one of the “other accounts” you choose as related to your main account in your tickmark discussion. If you believe one of these accounts is, in fact, appropriate to use in your analysis, you must contact your professor and get approval ahead of time. 10100 Cash on Hand 10200 Regular Checking Account 10300 Payroll Checking Account 10400 Savings Account 11000 Accounts Receivable 20000 Accounts Payable 39005 Retained Earnings X-ref Adjusted materiality threshold ($) used for Preliminary Analytics: Accounts Related to Tickmark E: Account ID 11000 40000 41000 62000 Account Description Accounts Receivable Sales Sales Returns Research and Development 20x6 X-ref 16,410,902.71 PY (246,172,918.44) PY 4,497,583.20 PY 31,212,334.17 PY Calculations or Ratios: Sales Returns / Sales 20x7 X-ref 51,515,259.98 TB (242,713,452.88) TB 11,100,220.89 TB 528,870.44 TB 1.83% Raw Change 35,104,357.27 3,459,465.56 6,602,637.69 (30,683,463.73) Percent Change T/M 213.91% E -1.41% E 146.80% E -98.31% E 4.57% Tickmark Outline: E (Example) - Accounts Receivable (A/R) increased $35.1M, 213.9%. Why? 1) Increase in A/R due to increase in Sales --> No. Sales did not increase. Sales is relatively constant. Increase in Sales is not the reason for increase in A/R.
2) Maybe it’s not that A/R is increasing. Maybe it’s that A/R is NOT decreasing. Customers aren’t paying.
– Customers are unsatisfied, refusing to pay.
3) Client stopped R&D. Maybe affecting products’ desirability/marketability (quality or fashion). End customers don’t like product.
4) Possible evidence of dissatisfaction:
– Increase in Sales Returns $ –> $6.6M increase in one year
– Increase in % of Sales Returns to Sales –> 1.8% to 4.6%
Accounts Related to Tickmark A:
Account ID
Account Description
20×6
[List your main account first, on this line]
[List all supporting accounts next in account number order]
[List all supporting accounts next in account number order]
Tickmark Outline:
A – [Begin writing your tickmark brainstorming ideas here.]
X-ref
20×7
X-ref
Raw Change
Percent Change
T/M
Accounts Related to Tickmark B:
Account ID
Account Description
20×6
X-ref
20×7
X-ref
Raw Change
Percent Change
T/M
X-ref
20×7
X-ref
Raw Change
Percent Change
T/M
[List your main account first, on this line]
[List all supporting accounts next in account number order]
[List all supporting accounts next in account number order]
Tickmark Outline:
B – [Begin writing your tickmark brainstorming ideas here.]
Accounts Related to Tickmark C:
Account ID
Account Description
20×6
[List your main account first, on this line]
[List all supporting accounts next in account number order]
[List all supporting accounts next in account number order]
Tickmark Outline:
C – [Begin writing your tickmark brainstorming ideas here.]
Selected Preliminary Analytical Procedures Instructions for the Critical Assignment (included here for reference purposes ONLY):
Complete the materiality analysis on A-5 first. Use the newly proposed materiality threshold as the basis for materiality analysis. Link your proposed mate
from A-5 to B-1 in the designated area below for easy reference.
For this workpaper you will choose three (3) accounts that meet the materiality fluctuation (flux) threshold for preliminary analysis. These will be the “ma
analyze.
While many firms use numbered tickmarks like you saw in in the Comparative Trial Balance Assignment, we will use lettered tickmarks for this assignmen
A, B, and C, ordered sequentially, for the main accounts you select.
For each main account, identify other accounts on the TB with which the main account has a relationship based on your knowledge of accounting cycles a
information provided in the client file. Each main account should be evaluated in relation to at least one additional “related account” (minimum of two ac
relationship discussed).
-All related accounts should be identified with the same tickmark.
-Each tickmark should be next to two or more identified accounts.
Hypothesize at least one significant reason we see the flux we see in the main account. To do this, use your knowledge of GAAP, accounting cycles, inform
the client file, and your business acumen.
Appropriately identify and analyze the flux in the main account. This will be based on a variety of factors including the expected versus actual fluxes in all
the relationship. You should evaluate what may or may not be expected to happen in the flux in accounts as well as the flux between the related account
to what actually happened or didn’t happen in the flux in accounts as well as the flux between the related accounts.
In your discussion, you should support your analysis and hypothesis with a legally defendable level of evidence. Provide a clear and accurate discussion a
reasons for the flux based on the relationships between accounts and the information provided in the Client File. Use information provided in the client fi
not limited to, documentation, BOD minutes, previous 10-K filings, etc. You may also perform additional calculations to support your discussion and analy
discussion and analysis of each main account should be at least one robust paragraph. See the discussion in tickmark E as an example.
Round dollar ($) amounts and percents (%) appropriately in your tickmark discussion.
Note: We DO NOT assume fraud or intentional wrong doings in our tickmark discussions. Any potential errors or misstatements are assumed to be
unintentional. There may be a risk of fraud, but we do not accuse a client of fraud without solid evidence, especially at the Planning Stage of an audit whe
looking at relationships and not performing substantive testing.
An example tickmark (E) is provided to give you an idea of the level of documentation and analysis expected. It also provides you with examples of
phrasing to help you use appropriate professional language when you write your tickmarks.
Don’t know where to begin? Hint: It is useful to first read through (or review) the documentation you have in the Client File.
Accounts You May NOT Select:
You may NOT select the following accounts for the main account of your analysis as most transactions within the accounting cycles eventually “pass throu
of the accounts listed below.
For the same reason, generally, these accounts should not be one of the “other accounts” you choose as related to your main account in your tickmark di
believe one of these accounts is, in fact, appropriate to use in your analysis, you must contact your professor and get approval ahead of time.
For the same reason, generally, these accounts should not be one of the “other accounts” you choose as related to your main account in your tickmark di
believe one of these accounts is, in fact, appropriate to use in your analysis, you must contact your professor and get approval ahead of time.
10100 Cash on Hand
10200 Regular Checking Account
10300 Payroll Checking Account
10400 Savings Account
11000 Accounts Receivable
20000 Accounts Payable
39005 Retained Earnings
Tickmark Documentation:
A – [Begin writing your tickmark here.]
B – [Begin writing your tickmark here.]
B – [Begin writing your tickmark here.]
C – [Begin writing your tickmark here.]
our proposed materiality amo unt
hese will be the “main accounts” you
s for this assignment. Use tickmarks
accounting cycles and/or
(minimum of two accounts for each
unting cycles, information provided in
s actual fluxes in all the accounts in
he related accounts in comparison
ccurate discussion and analysis of the
vided in the client file including, but
iscussion and analysis. Your
are assumed to be “innocent” and
age of an audit when we are only
examples of some common audit
entually “pass through” one or more
in your tickmark discussion. If you
of time.
in your tickmark discussion. If you
of time.