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This simulation presents an audit request list document for materials requested of management that has been prepared by an audit team staff member for the Keystone audit. Because this simulation addresses material presented in Chapters 1013 (plus other general knowledge concerning auditing), we include it here. Note, however, that the information obtained through such an audit request list would be obtained very early in the audit.

The CPA firm Adams, Barnes & Company is preparing for the year 20X5 audit of Keystone Computers & Networks Incorporated (KCN), a calendar year-end nonissuer. An audit staff member started with the 20X4 year audit request list for KCN and updated it as he thought appropriate.

Required:

Your job as senior on the engagement is to review and revise the year 20X5 request list for KCN as needed. For each of the sentences called out in the points on the document, determine if the current language is appropriate as is, should be removed altogether, or replaced with any of the provided alternatives. Ensure that the 20X5 list is appropriate given the information provided. The materiality for the year 20X5 audit has been set at $300,000. Links to each of the exhibits are provided in the document, but are available in the list below for convenience.

Exhibit 1 - Excel SpreadsheetKCN Working Trial Balance

Exhibit 2 - Memo to Files

Exhibit 3 - Forwarded Email from Controller to Partner

Exhibit 4 - Email from Audit Manager to Audit Partner

Document

(For each Document Callout, choose the correct Determination from the table below.)

Keystone Computers & Networks, Inc.

Year Ended December 31, 20X5

Audit Request List (Draft 1)

Please have the materials listed below ready for when we arrive on site. Unless a different date is specifically stated, these documents should be as of and for the year ended December 31, year 20X5.

• Final working trial balance

• Bank reconciliations for June and December, year 20X5.

• Bank statements for December, year 20X5 and January, year 20X6.

• Trial balance of accounts receivable.

• Accounts receivable summarized by date of most recent purchase. (Callout #1)

• Property, plant, and equipment roll-forward of changes during the year.

• Furniture and fixtures purchase documentation.

• Sales of the Plumtree small business accounting system by month.

• Invoices supporting depreciation expense for the year. (Callout #2)

• Software development cost invoices and other support. (Callout #3)

• Support relevant to the amortization of the software development cost.

• Vouchers supporting increase in leasehold improvements. (Callout #4)

• Detailed analysis and reconciliation of each unpaid account payable at year-end. (Callout #5)

• Inventory detail by category (finished goods, WIP, raw materials).

• Documentation supporting change in capital stock outstanding. (Callout #6)

• Quarterly board of directors meeting minutes.

• Managements review of receivables from officers. (Callout #7)

• Prepaid expenses analysis.

• Accrued expenses analysis.

• Supporting documents for dividends paid.

• Account 7140.10 expense analysis. (Callout #8)

Callouts Determination

1. "Accounts receivable summarized by date of most recent purchase."

2. "Invoices supporting depreciation expense for the year."

3. "Software development cost invoices and other support."

4. "Vouchers supporting increase in leasehold improvements."

5. "Detailed analysis and reconciliation of each unpaid account payable at year-end."

6. "Documentation supporting change in capital stock outstanding."

7. "Managements review of receivables from officers."

8. "Account 7140.10 expense analysis."

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