Background:
As a result of your preliminary findings, TechWear’s audit committee has asked that you postpone the issuance of your audit report until at least 80% of the accounts receivable balance outstanding at December 31, 2016, has been resolved (e.g., collected, written off or returned).
As of May 31, 2017, approximately 80% of the accounts receivable balance has been settled, so it is time to perform your procedures. The client has provided you with the data that you requested (in the module: ACT558_Module_06_P5_Data.xls Download ACT558_Module_06_P5_Data.xls). Procedures already have been performed by your team to ensure that the data you received is complete and accurate.
The data file includes two tabs — 2017 AR data and 2016 Unapplied cash.
2017 AR data tab
This data includes January through May 2017 cash received, write-offs and returns for 2016 account balances. The data fields are the same as what you received for 2016, with the exclusion of the invoice date. Additionally, the “Type” field includes transaction information for write offs (Write-off) and returns (Returns).
2016 Unapplied cash tab
This data includes the same fields as what you received for the 2016 accounts receivable data. This data represents the unapplied cash at the end of 2016 updated now to reflect a “type” of “CashReceipt” and also includes the transaction number, applied to transaction number and invoice date information.
Required:
Submit in one Word document with a cover page the answers to the following questions:
- Prepare a December 31, 2016, runoff analysis as of May 31, 2017 (demonstrating how the December 31, 2016, balance has “run off,” meaning explain what happened to the beginning balance to get to the ending balance, between January 1 and May 31, 2017). Display this at the customer level with the ability to drill down to the transaction (invoice) level. Document your findings by completing the following table:Adjusted accounts receivable as of December 31, 2016$15,118,973.57RunoffNet returnsNet bad debt write-offsNet cash receiptsRemaining accounts receivable as of May 31, 2017
Calculate the 2017 cash receipts on the December 31, 2016, balance by month and provide a visualization of the trend.
Determine what amount of the December 31, 2016, accounts receivable balance you believe is collectible. Prepare a summary report as part of your Word document for the audit committee that includes your audit findings and audit adjustments (continue using the previous summary of audit findings document from question #1). Your Word document should be 2-3 pages in length, double-spaced, and take you less than 10 minutes to present as a guide. Use the previous template to present your audit adjustments for the accounts receivable balance, only as provided below (note that you can add or delete items from the table below if you have more/fewer findings and adjustments than listed). Also, use the visualizations that you have prepared to support your report.
- Summary of audit findings Accounts receivableAs of December 31, 2016$18,114,802.50Audit finding/adjustment Audit finding/adjustment Audit finding/adjustment Audit-adjusted balance as of December 31, 2016
