University of California Los Angeles Apollo Auditors Report Audit Mini Case Worksheet

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University Of California Los Angeles

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Apollo Auditors Report Audit Mini-Case Apollo Auditors Report Audit Mini-Case In this mini-case you will help create documents related to the auditors report of the Apollo audit. Instructions: Read and respond to all emails and requests from your manager. When you are finished with the entire workbook rename this document AuditReport_Firstname_Lastname and upload. Email memo from your manager, Darlene These emails are NOT workpapers. Rather they are useful communications for completing your case. They do not get a workpaper reference. Apollo Shoes Inc. Auditors Report For Year Ended 12/31/2020 Report of Independent PCAOB Registered Auditors To the Board of Directors and Shareholders of Apollo Shoes, Inc.: We have audited the accompanying consolidated balance sheet of Apollo Shoes, Inc. as of December 31 consolidated statements of income, shareholders’ equity, and cash flows for the year ended December 31 statements are the responsibility of the Company’s management. Our responsibility is to express an opin based on our audits. We conducted our audit in accordance with auditing standards of the Public Company Accounting Overs standards require that we plan and perform the audit to obtain reasonable assurance about whether the fin material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts an statements. An audit also includes assessing the accounting principles used and significant estimates ma evaluating the overall financial statement presentation. We believe that our audits provide a reasonable A large sale ($5.8 million) was recorded in late December to a major customer after the customer had de do not believe that the sale is realizable, we do not believe the transaction should be recorded as a sale. with our position and has recorded the transaction nonetheless. We believe that net income, retained earn result. In addition, the Company has recorded a significant account receivable ($20 million, including th transaction discussed above) at December 31, 2020 which relates to the same customer who is currently believe there is serious doubt about the collectability of this account receivable. Management also disag matter and has shown the account receivable as collectible nonetheless. We believe that accounts receiva earnings are overstated as a result. In our opinion, with the exception of the matters disclosed above, the financial statements referred to abo respects, the financial position of Apollo Shoes, Inc. as of December 31, 2020, and the results of its oper year then ended in conformity with accounting principles generally accepted in the United States. The accompanying consolidated financial statements have been prepared assuming that the Company wi discussed in the Notes to the consolidated financial statements, the Company’s operations through 2020 of sales revenue. These factors, among others (bankruptcy of a significant customer, ongoing strike, con litigation), raise substantial doubt about the Company’s ability to continue as a going concern. The cons not include any adjustments that might result from the outcome of these uncertainties. Internal Control Over Financial Reporting We also audited the effectiveness of the Company’s internal control over financial reporting as of Decem established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organiz Commission (COSO). The Company’s management is responsible for maintaining effective internal con responsibility is to express an opinion on the effectiveness of the Company’s internal control over financ We conducted our audit of internal control over financial reporting in accordance with the standards of t Oversight Board (United States). Those standards require that we plan and perform the audit to obtain re effective internal control over financial reporting was maintained in all material respects. An audit of int reporting includes obtaining an understanding of internal control over financial reporting, evaluating ma and evaluating the design and operating effectiveness of internal control, and performing such other proc in the circumstances. We believe that our audit provides a reasonable basis for our opinions. in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assura financial reporting and the preparation of financial statements for external purposes in accordance with g principles. A company’s internal control over financial reporting includes those policies and procedures of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the a reasonable assurance that transactions are recorded as necessary to permit preparation of financial statem accepted accounting principles, and that receipts and expenditures of the company are being made only i of management and directors of the company; and (iii) provide reasonable assurance regarding preventio unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on Because of its inherent limitations, internal control over financial reporting may not prevent or detect mi any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequ conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial r reasonable possibility that a material misstatement of the company’s annual or interim financial statemen detected on a timely basis. The following material weaknesses have been identified, but were not include The Company did not maintain effective internal control over financial reporting relating to revenue and the Company corrected for many of the material misstatements we found, the Company did not adjust its material misstatements noted in our report on the Company’s audited financial statements. The material weaknesses were considered in determining the nature, timing and extent of audit tests app consolidated financial statements as of and for the year ended December 31, 2020, of the Company. In o of the material weaknesses identified above on the achievement of the objectives of the control criteria, t effective internal control over financial reporting as of December 31, 2020, based on the criteria establis Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commiss Anderson, Olds, and Watershed K-1 Prepared by TC Reviewed by Inc. as of December 31, 2020, and the related ear ended December 31, 2020. These financial ity is to express an opinion on these financial statements pany Accounting Oversight Board (PCAOB). Those ce about whether the financial statements are free of pporting the amounts and disclosures in the financial ignificant estimates made by management, as well as s provide a reasonable basis for our report. ter the customer had declared bankruptcy. Because we be recorded as a sale. Management, however, disagrees et income, retained earnings and sales are overstated as a 20 million, including the $5.8 million December tomer who is currently in bankruptcy proceedings. We Management also disagrees with our position on this ve that accounts receivable, net income and retained atements referred to above present fairly, in all material d the results of its operations and its cash flows for the e United States. g that the Company will continue as a going concern. As perations through 2020 were financed using debt instead mer, ongoing strike, contingent liability relating to oing concern. The consolidated financial statements do l reporting as of December 31, 2020, based on criteria of Sponsoring Organizations of the Treadway ng effective internal control over financial reporting. Our rnal control over financial reporting based on our audit. with the standards of the Public Company Accounting m the audit to obtain reasonable assurance about whether espects. An audit of internal control over financial porting, evaluating management’s assessment, testing orming such other procedures as we consider necessary r opinions. r opinions. vide reasonable assurance regarding the reliability of es in accordance with generally accepted accounting olicies and procedures that (i) pertain to the maintenance and dispositions of the assets of the company; (ii) provide ation of financial statements in accordance with generally y are being made only in accordance with authorizations nce regarding prevention or timely detection of ave a material effect on the financial statements. ot prevent or detect misstatements. Also, projections of ls may become inadequate because of changes in deteriorate. control over financial reporting, such that there is a erim financial statements will not be prevented or ed, but were not included in management’s assessment. relating to revenue and expense recognition. Although mpany did not adjust its financial statements for two atements. xtent of audit tests applied in our audit of the 0, of the Company. In our opinion, because of the effect of the control criteria, the Company has not maintained on the criteria established in Internal Control— he Treadway Commission. To: "Darlene Wardlaw" Subject: Apollo CAM First Draft Darlene, RESPOND HERE TO DARLENE'S REQUEST FOR AN ATTEMPTED CRITICAL AUDIT MATTER PARA AUDIT MATTER PARAGRAPH.
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Apollo Auditors Report Audit Mini-Case

Apollo Auditors Report Audit Mini-Case
In this mini-case you will help create documents related to the auditors report of the Apollo audit.
Instructions:
Read and respond to all emails and requests from your manager.
When you are finished with the entire workbook rename this document AuditReport_Firstname_Lastname and
upload.

Email memo from your manager, Darlene

These emails are NOT
workpapers. Rather they are
useful communications for
completing your case. They do
not get a workpaper reference.

Apollo Shoes Inc.
Auditors Report
For Year Ended 12/31/2020
Report of Independent PCAOB Registered Auditors
To the Board of Directors and Shareholders of
Apollo Shoes, Inc.:

We have audited the accompanying consolidated balance sheet of Apollo Shoes, Inc. as of December 31
consolidated statements of income, shareholders’ equity, and cash flows for the year ended December 31
statements are the responsibility of the Company’s management. Our responsibility is to express an opin
based on our audits.

We conducted our audit in accordance with auditing standards of the Public Company Accounting Overs
standards require that we plan and perform the audit to obtain reasonable assurance about whether the fin
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts an
statements. An audit also includes assessing the accounting principles used and significant estimates ma
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
A large sale ($5.8 million) was recorded in late December to a major customer after the customer had de
do not believe that the sale is realizable, we do not believe the transaction should be recorded as a sale.
with our position and has recorded the transaction nonetheless. We believe that net income, retained earn
result. In addition, the Company has recorded a significant account receivable ($20 million, including th
transaction discussed above) at December 31, 2020 which relates to the same customer who is currently
believe there is serious doubt about the collectability of this account receivable. Management also disag
matter and has shown the account receivable as collectible nonetheless. We believe that accounts receiva
earnings are overstated as a result.

In our opinion, with the exception of the matters disclosed above, the financial statements referred to abo
r...


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