Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
Group Number:
#1
Group Members
(list names):
Albin Paul
Mayank Gupta
Muhammad Hassan Akram
Rushil Kummar Krishna
Sandra Cheruvathoor Sam
Question 1:
a) According to the review, Teper and Lubetsky should accept the audit engagement of the Autio Inc corporation as
the audit engagement evaluation is positive and also internal control of the company is effective when
compared to the overall risk.
1) Autio Corp has an effective and efficient internal financing operations, as the corporation hasn’t had any dispute
inregards of payments to suppliers, vendors which ensures the company’s operations are not affected
whatsoever ensuring the objective of efficiency and completeness is achieved. Also as stated in the agreement
that the company maintains a proper records and clearly documents each and everything which ensures
operations are done effectively and efficiently with suppliers, as it will ensure that all documents with different
suppliers, updated price lists, financial reports are in order. High ethical standards of the company means that it
would be helpful for the investors and the stakeholders of the company as high ethical standards means that the
company has a good reputation and credibility in the market.
Based on the given information audit should be accepted.
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
2) Shareholders are the owners of the company who have a right to say in how the company works and operates.
As said, the company has two shareholders, and each of them is intimately knowledgeable of company financial
and operating Waffairs. Having only two knowledgeable shareholders has an overall advantage for the Autio. Inc
corporation as all the decisions on how the company would run and operate the business needs an approval
from the shareholders and having less shareholders means the overall efficiency would be achieved for the
company to be successful. Having Knowledgeable shareholders who often speak with the top level management
means constant checks for any reporting errors may be found and corrected, which will help the company. Also,
it would help the company to take important decisions related to the performance of the company. Probability
of having any misrepresentation of financial statements or fraud in the balance sheet would be very minimal
when one of the shareholder of the company is also the sole owner of all the company’s bond.
Based on the given information audit should be accepted.
3) Company changes suppliers of its inventory on a regular basis, including change in country and currency of
payments which means that the company needs to have a stable accounting system that consolidate the financial
statements between the two due to the different methods of the reporting currency values. Thus, the company
should have some type of system/software to acknowledge the foreign transactions into their own reporting
system. Continuously changing exchange rates will not benefit the company as it will lead to miscalculations and
also it is not easy for the company to adjust the differences in the accounting standards of the foreign company
when they prepare their financial statements. Change in the value of foreign currency will generate gains/ loss for
the company which needs to be acknowledged and recorded to the correct books of accounts. If the company is
changing their suppliers continuously, this will create a bad reputation/image of the company in the market and
it would create trustworthy issues for the company. Suppliers would be hesitant in giving supply to the company
knowing the history of the company of changing suppliers frequently. Also, it is important for the company to
have a regular trustworthy supplier whom the company can rely that they will meet the proper standard
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
requirements of the company, if bad quality material is supplied it could damage the reputation of the firm.
Therefore, it is always advisable to have a regular supplier whom you can reply to match the standards of the
company.
Based on the information audit should be accepted.
Overall the audit by the Autio. Inc should be accepted by Teper and Lubetsky
b) Current Assets = Cash + Accounts Receivable - Reserves + Inventory
= $144000 + $126000- $2000 + $246000
= $514000
Current Liabilities = Accounts Payable + Bonds Payable
= $245000 + $20000
= $265000
Current Ratio = Current Assets/Current Liabilities
Current Ratio= $514000/$265000
= 1.93/1
Industry Standard is 1.8: 1
Quick Assets = Cash + Net Receivables
= $144000 + $124000
= $268000
Quick Liabilities = $265000
Quick Ratio = Quick Assets/ Quick Liabilities
Quick Ratio = $268000/$265000
= 1.01/1
Industry Standard is 0.9: 1
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
According to Current ratio and Quick ratio of Autio Inc Corporation, the corporation is performing above the
industry standards which makes company in a very strong position to meet its debt/ equity requirements. Also, price of
company’s Assets, Equity Share, Bonds will be above the fair value of the market.
2
Collectability of the 2020 net Accounts Receivable using 2019 as a reasonable basis.
Net Accounts Receivable = Gross Accounts Receivable – Allowance for doubtful Accounts
= $105000- $5000
= $100000
The total collectible AR for 2020 on the basis of 2019 is $ 100000
Question 2:
a) Aged Accounts Receivable Trial Balance for Foot Fault:
Customer
Acton Tennis
Club
Acton Tennis
Club
Bowmanville
Athletic Club
Bowmanville
Athletic Club
Bowmanville
Athletic Club
Caledonia Sports
and Fitness
Caledonia Sports
and Fitness
Caledonia Sports
and Fitness
Dominic's Tennis
Spot
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Invoice Number
1010
1022
1006
1013
1014
No of Days
Aged
Amount
25-Sep-20
36
1000
15-Oct-20
16
5000
25-Aug-20
67
1500
28-Sep-20
33
2000
04-Oct-20
27
3000
30-Jun-20
123
6000
02-Oct-20
29
4000
4000
10-Oct-20
21
3000
3000
27-Jul-20
96
4000
Invoice Date
0-29
Days
30 - 60
Days
61-90
Days
Over 90
Days
1000
5000
1500
2000
3000
6000
1002
1015
1018
1003
4000
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
Dominic's Tennis
Spot
Dominic's Tennis
Spot
Edwards Gardens
Tennis
Edwards Gardens
Tennis
Edwards Gardens
Tennis
Farnaz’s Racquet
Club
Farnaz’s Racquet
Club
Giovanni's Tennis
Emporium
Harry's Athletics
Ing Tennis and
Golf Club
Customer
Jang's Athletic
Club
Kingston
Downtown
Tennis
Kingston
Downtown
Tennis
Leamington
Sports Centre
Morningside
Tennis Club
Newtonbrook
Sports Centre
Newtonbrook
Sports Centre
Total
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1005
1011
1016
1019
1026
1008
1023
1012
1020
1017
Invoice Number
27-Aug-20
65
2500
27-Sep-20
34
4000
02-Oct-20
29
4000
4000
13-Oct-20
18
4000
4000
24-Oct-20
7
4000
4000
15-Sep-20
46
2000
15-Oct-20
16
4000
27-Sep-20
34
2000
13-Oct-20
18
8000
8000
05-Oct-20
26
6400
6400
Invoice Date
No of Days
Aged
Amount
2500
4000
2000
4000
2000
0-29
Days
30 - 60
Days
61-90
Days
1007
31-Aug-20
61
8000
8000
1004
25-Aug-20
67
6600
6600
1025
17-Oct-20
14
7500
7500
1021
13-Oct-20
18
15000
15000
1001
31-May-20
153
7000
1009
22-Sep-20
39
7500
1024
15-Oct-20
16
3000
3000
125000
70900
Over 90
Days
7000
7500
18500
18600
17000
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
Provision for Accounts
doubtful:
Amount
Provision
(collectability
of
receivables)
%
0-29 Days
70900
0%
0
30 - 60 Days
18500
2%
370
61-90 Days
18600
10%
1860
Over 90 Days
17000
50%
8500
Total
125000
Provisional
Amount
10730
Please Note: In order to calculate the number of days aged (31st October 2020 – the invoice date of each invoice).
b) It can be seen that the allowance for Doubtful Accounts made is $5000 but instead it should have been $10730 which
exceeds the provision made by $5730 (10730 - 5000). Michele had set the materiality level to be $5000 and the
difference is exceeds this amount. Therefore, the Provision for Doubtful Accounts must be revised and reviewed as it is
materially misstated.
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
Question 3:
VALIDITY OBJECTIVE
This objective ensures that the recorded transactions are valid and documented fairly. Existence is the associated
assertion here.

Matching payment voucher against particular purchase invoice.

Matching purchase order against the receipt of goods.
AUTHORISATION OBJECTIVE
This objective ensures that the transactions are authorized according to the company policy and prevent any
unauthorized transactions from entering into the records. Ownership assertion is used here.

Inspecting signature of the person who authorize the payment voucher and verification of him being competent
for the authorization.

Invoices to debtors are to be authorized by the person with their delegation of authority.
ACCURACY OBJECTIVE
This objective ensures that the transactions dollar amounts are properly calculated. It includes the valuation assertion.

Reviewing Bank Reconciliation Statement for accuracy.

Tracing payment voucher to purchase invoice to ensure accuracy of payments.
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Group Assignment 1 (GA1) for ACCT 742
Winter 2021
Stephen Hudovernik – The Business School, Centennial College
Reference


https://www.freshbooks.com/hub/reports/accounts-receivable-aging-report
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