Apollo Preliminary Analytical Procedures Audit Mini-Case
In this mini-case you will perform the Preliminary Analytical Procedures required as part of audit planning. For
ease your audit manager has already organized the workpapers and completed the planning materiality worksheet.
Instructions:
Read the planning materiality memo from your team member (Taylor Crump), then read the steps in the audit
program found on Work Paper B-0 and familiarize yourself with work paper B-1. Complete all the steps on the
audit program. Be sure to document your work using the designated tick marks. The tick mark legend is located at
the bottom of each work paper.
When you are finished with the PAP workpaper, enter your initials in the box in the top right marked "Prepared
By"
This entire completed workbook should be renamed as PreAP_Firstname_Lastname and upload.
Apollo Shoes, Inc.
AUDIT PLAN—Preliminary Analytical Procedures
FYE 12/31/2020
Workpaper
Reference
1
2
3
Complete engagement materiality memo.
Obtain 2019 audited trial balance and 2020 unaudited
trial balance. Create Preliminary Analytical
Procedures (PreAP) workpaper that calculates
absolute and percentage change over the prior year for
each line item.
Cross reference all balances on PAP workpaper to TB
and foot amounts.
Investigate any percentage change > 10% or over
Planning Materiality (see A-5).
4
5
Select three important changes noted on the PreAP,
and include them on the deliverable for your senior to
review. For each change, specify two hypotheses that
could be driving each change.
A-5
Related Assertion
(s)
B-0
Performed
by
TC
Comments
Please comment on whether you think
materiality seems reasonable and why?
You will select only three changes to
investigate (see step 5). However, this
step would be completed in a normal
audit.
Apollo Shoes, Inc
Trial Balance (Audited)
31-Dec-19
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
PBC
A-1
Account Description
Debit
Cash on Hand
$1,987.28
Regular Checking Account
$198,116.52
Payroll Checking Account
$0.00
Savings Account
$3,044,958.13
Accounts Receivable
$16,410,902.71
Allowance for Doubtful Accounts
0
Inventory - Spotlight
$18,825,205.24
Reserve for Inventory Obsolescence
0
Prepaid Insurance
$743,314.38
Prepaid Rent
$200,000.00
Office Supplies
$7,406.82
Notes Receivable-Current
0
Other Current Assets
0
Land
$117,000.00
Buildings and Land Improvements
$623,905.92
Machinery, Equipment, Office Furniture
$433,217.10
Accum. Depreciation
0
Investments
$572,691.08
Other Noncurrent Assets
$53,840.59
Accounts Payable
0
Sales Tax Payable
0
Wages Payable
0
FICA Employee Withholding
0
Medicare Withholding
0
Federal Payroll Taxes Payable
0
FUTA Tax Payable
0
State Payroll Taxes Payable
0
SUTA Tax Payable
0
FICA Employer Withholding
0
Medicare Employer Withholding
0
Line of Credit
0
Current Portion Long-Term Debt
0
Other Current Liabilities
0
Notes Payable-Noncurrent
0
Common Stock
0
Paid-in Capital
0
Retained Earnings
0
Sales
0
Sales Returns
$4,497,583.20
Warranty Expense
$1,100,281.48
Income from Investments
0
Interest Income
0
Miscellaneous Income
0
Cost of Goods Sold
$141,569,221.61
Freight
$4,302,951.46
Advertising Expense
$897,140.01
Auto Expenses
$208,974.39
Credit
0
0
0
0
0
$1,262,819.88
0
$3,012,000.00
0
0
0
0
0
0
0
0
$164,000.00
0
0
$4,633,118.09
$0.00
$29,470.32
$1,318.69
$583.99
$6,033.01
0
$2,815.47
0
$1,318.69
$583.99
$10,000,000.00
0
0
0
$8,105,000.00
$7,423,000.00
$2,219,120.65
$246,172,918.44
0
0
$0.00
$204,302.81
$0.00
0
0
0
0
62000
64000
64500
65000
66000
67000
68000
70000
70100
70110
70120
71000
72000
73000
74000
77500
78000
78500
78510
80000
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
Loss on Legal Settlement
$31,212,334.17
$133,000.00
$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
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$283,238,404.03
Apollo Shoes, Inc
Preclosing Trial Balance
31-Dec-20
PBC
A-2
Account ID
Account Description
Debit Amt
10100 Cash on Hand
$
2,275.23
10200 Regular Checking Account
$ 557,125.92
10300 Payroll Checking Account
10400 Savings Account
$ 3,645,599.15
11000 Accounts Receivable
$51,515,259.98
11400 Other Receivables
$ 1,250,000.00
11500 Allowance for Doubtful Accounts
12000 Inventory
$67,724,527.50
12300 Reserve for Inventory Obsolescence
14100 Prepaid Insurance
$ 3,424,213.78
14200 Prepaid Rent
14300 Office Supplies
$
8,540.00
14400 Notes Receivable-Current
14700 Other Current Assets
15000 Land
$ 117,000.00
15100 Buildings and Land Improvements
$ 674,313.92
15200 Machinery, Equipment, Office Furniture$ 2,929,097.13
17000 Accum. Depreciation
19000 Investments
$ 1,998,780.39
19900 Other Noncurrent Assets
$
53,840.59
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
24100 Line of Credit
24200 Current Portion Long-Term Debt
24700 Other Current Liabilities
27000 Notes Payable-Noncurrent
39003 Common Stock
39004 Paid-in Capital
39005 Retained Earnings
40000 Sales
41000 Sales Returns
$11,100,220.89
42000 Warranty Expense
$ 1,158,128.47
45000 Income from Investments
46000 Interest Income
47000 Miscellaneous Income
50010 Cost of Goods Sold
#############
57500 Freight
$ 4,240,263.09
60000 Advertising Expense
$ 1,036,854.01
61000 Auto Expenses
$ 210,502.80
62000 Research and Development
$ 528,870.44
64000 Depreciation Expense
$ 446,000.00
64500 Warehouse Salaries
$ 4,720,715.56
65000 Property Tax Expense
$
99,332.45
66000 Legal and Professional Expense
$ 4,913,224.45
67000 Bad Debt Expense
68000 Insurance Expense
$
36,106.92
70000 Maintenance Expense
$
35,502.87
70100 Utilities
$ 137,332.18
70110 Phone
$
52,599.02
70120 Postal
$
77,803.61
71000 Miscellaneous Office Expense
$
24,891.82
72000 Payroll Tax Exp
$ 1,577,811.85
73000 Pension/Profit-Sharing Plan Ex
$ 3,630,375.80
78600 Controllers' Clearning Account
74000 Rent or Lease Expense
$ 1,206,574.00
77500 Administrative Wages Expense
$16,197,225.43
78000 Interest Expense
$ 2,591,736.50
78500 Income Tax Expense - Federal
$ 8,900,000.00
78510 Income Tax Expense - State
$ 3,100,000.00
#############
Credit Amt
$ 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
#############
$ 1,426,089.31
$ 131,881.46
$ 2,166,000.00
$
330,375.80
#############
Apollo Shoes
ENGAGEMENT MATERIALITY
(Required for all engagements)
Apollo Shoes
December 31, 2020
CLIENT:
PERIOD ENDED:
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.
ADJUSTED NET INCOME (LOSS)
Current Year
50,549,082
Prior Year
4,371,363
50,549,082
4,371,363
2,527,454
218,568
Adjusted net income (loss) multiplied by:
5%
Current Year
131,205,564
TOTAL ASSETS
36,793,726
Total assets multiplied by:
1%
1,312,000
368,000
Current Year
TOTAL REVENUES
Plus (minus) unusual, non-recurring revenues
241,675,335
-
ADJUSTED REVENUES
-
241,675,335.24
0
2,416,753
Total adjusted revenues multiplied by:
1%
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, Adjusted net income
total assets, other):
Justification: Based on prior experience with the client we conclude that adjusted net income is an
appropriate base for planning materiality.
Standard 5% used.
3. Percentage of financial data source used:
4. Amount selected (planning materiality)
2,527,454
5. Prior year’s final materiality
218,568
6. Performance materiality/Tolerable
misstatement (75% of planning materiality)
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%
126,373
Engagement Partner
A. Anderson
Engagement Quality Control Reviewer
Ernest Olds
A-5
Prepared by
Reviewed by
ng stage of every audit.
TC
AA
Apollo Shoes, Inc
Preliminary Analytical Procedures
Audited
2019
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
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
(Audited)
B-1
Prepared by
Reviewed by
Unaudited
2020
(Unaudited)
Raw Change
Percent Change
(CY-PY)
(Raw Change/PY)
E
E
E
61000
62000
64000
64500
65000
66000
67000
68000
70000
70100
70110
70120
71000
72000
73000
78600
74000
77500
78000
78500
78510
80000
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
Controllers' Clearning Account
Rent or Lease Expense
Administrative Wages Expense
Interest Expense
Income Tax Expense - Federal
Income Tax Expense - State
Loss on Legal Settlement
E
Tickmark Legend
F - Footed without exception
M - Amount is considered immaterial (
Purchase answer to see full
attachment