220_Appendlx C — Paper lit SIMULATION 1 (90 minutes) is August 15, 2013, and you, CA, are called into the office of Patricia Gonsalves, a partner at Princess & Gonsalves, Patricia begins, “We have started our field work on the audit of Enterprise Technology Systems Ine (ETS), whch operates across the country. ETS is primarily engaged in the sale of software and new and refurbished hardware “During the audit, the staff person in charge of the engagement left the firm to pursue another ‘opportunity. I want you to look at the work done to date (Exhubit I) to identity addtional procedures that eed to be performed and issues related to the procedures already done. Please also provide ‘ecommendations on any acccunting issues you identify in the June 30, 2013 year-end file “Although ETS has experienced losses in some years, management is expecting to be profitable going forward due fo the company’s new line of business selling refurbished servers, ET'S has been trading on. the TSX-V (stock exchange for small venture companies) for about five years now and reports under Intemational Financial Reporting Standards (IFRS). ‘nally, the chief financial officer (CFO) implemented some new IT controls in an effort to make the system mere automated (Exhibit I). Please evaluate the effectiveness of the controls and explain how they might affect our audit.”Uniform Evaluation Report— 2013 221 ‘SIMULATION 1 (continued) EXHIBIT EXCERPTS FROM WORKING PAPER FILE Cash have ottained copies of the bank reconciliation and the bank statement as at June 30, 2013, ENTERPRISE TECHNOLOGY SYSTEMS INC BANK RECONCILIATION Asat June 30, 2013, Balance per bank statement S$ 1224300 Less: outstanding cheques. Cheque # ‘Cheque Date 101008 1015/2012 (132,694) 112233 6115/2013, 8,465) 12244 6116/2013 (6,465) #112266, 6116/2013 (88,729) #112277 6/16/2013 3,410) 112288, 6/25/2013 3,760) 112299, 6/25/2013 0.383) *117310 0/25/2013 (145891) 112321 6/25/2013 7,503) Bank balance per general ledger $798,000 ¥ C Agreed to bem confirmation * Vouched to copy of cancelled cheque Agreed to balance sheet CENTRAL ONTARIO BANK OF MONEY Receipts Payments Date ___Balanve Opening balance 0621/2013 $1,955,061 Payroll ~ commissions $196,771 06/24/2013 $1,758.2 Payroll ~ regular $560,792 06/24/2013 $1,191,498 Cheque 112166 $100,208 06/27/2013 $1,091,290 Frank’s Supermarket $54,233, 06/27/2013 $1,145,523 Roceiver General ~GST/HST refiand $78,777 06/28/2013 $1/224.300 Ending balance 06/30/2013 $1,224,300222 _Appendic C Paper lit SIMULATION 1 (continmed) EXHIBIT (co EXCERPTS FROM WORKING PAPER FILE Accounts Receivable I reviewed the aged receivables and sent out confirmations as indicated below. I picked customers that, according fo management, would be quick to respond, All confirmations have been returned and no issues were noted, ‘of Dys Outstanding Balance per Balance pr Gustomer Name 0-30 MAS 46-60. 61-9090 Listing Confirmation __ Difference Frank's Supermarket 12,456 24,000 36,456 36456 ‘We Sel Good Sut? 50,000 18,000 68,000 68000, - Randal Stevensine. 765,999 165,999 No confirmation sent Cupcake Gis 48.000 48,000 8000 ‘Twins Therapeutics 1,750,000, 1,750,000 No confirmation sent Kay Plumbing 280,808 135,608 416,546 416586 9841236 ine 3,250,000 3.280.000 Farrow & Desaegher 399,999 499.99 ‘Tools Tools Tools 299,000 299,000 Z ‘Total 6.559.322 349,000 135,68 42,000 48000 7.134000 Agreed to balance sheet ‘Therefore, we have obtained comfort over the existence and valuation of accounts receivable, There is no allowance for doubtful accounts at year end and this appears reasonable, Inventory ET'S buys used ot broken point-of-sale items (eash registers, bat code scanners, ete), which i then repairs and sells, Any item that requires significant work or new parts is scrapped. Inventory is reclassified from parts to serap inthe acecunting records when ETS determines thatthe problems are not worth fixing