Apollo Shoes Planning
GA-3
Prepared K.E;M.B.(1/13/2012)
Apollo Shoes, Inc.
Relevant Matters Based on Minutes (December 31, 2011)
Information Relevant to 2010 Audit
1. Remarks by Apollo Shoes Inc. CEO Larry Lancaster in regards to the 10% projected increase in sales for the 2011fiscal year. (“Well they better increase by that much or heads will roll.”) GA-3.1 2. Majority vote by members of the board to internalize product production GA-3.1 3. $90,000 stipend awarded to outside Board Members GA-3.1 4. Refinancing of short-term credit GA-3.1 5. $ 50,000 in damages due to April snowstorm GA-3.2 6. Discontinuation of Research and Development; replaced by personal gym to be used by corporate executives. GA-3.2 7. $8,810.13 Account Receivable write-off; CEO “heads would roll” statement limiting the number of receivables deemed uncollectable. GA-3.2 8. $1,000,000 board-approved loan to CEO’s personal secretary GA-3.2 9. $1,200,000 computer system purchase; $44,053,000 credit withdrawal. GA-3.2 10. $810,000 retroactive cash dividend GA-3.3 11. $12,000,000 class action lawsuit GA-3.3
Audit Action Recommendations
1. Assess whether or not Apollo Shoes, Inc used proper accounting methods and procedures to record revenue; Search for signs of accelerated recognition of revenues. 2. Question management about the decision to produce their product in-house. Obtain external evidence supporting Apollo’s acquisition of $1,300,000 equipment. (Vendor invoice, etc.) 3. Question management’s decision to award outside Board Members $90,000. Compare Board of Directors stipend to stipends awarded to directors of similar companies
4. Verification of increase in current liabilities stemming from the note payable due January 12, 2012 5. Recruit an independent damage appraisal specialist to assess the Shoetown damage caused by the
Prepared K.E;M.B.(1/13/2012)
Apollo Shoes, Inc.
Relevant Matters Based on Minutes (December 31, 2011)
Information Relevant to 2010 Audit
1. Remarks by Apollo Shoes Inc. CEO Larry Lancaster in regards to the 10% projected increase in sales for the 2011fiscal year. (“Well they better increase by that much or heads will roll.”) GA-3.1 2. Majority vote by members of the board to internalize product production GA-3.1 3. $90,000 stipend awarded to outside Board Members GA-3.1 4. Refinancing of short-term credit GA-3.1 5. $ 50,000 in damages due to April snowstorm GA-3.2 6. Discontinuation of Research and Development; replaced by personal gym to be used by corporate executives. GA-3.2 7. $8,810.13 Account Receivable write-off; CEO “heads would roll” statement limiting the number of receivables deemed uncollectable. GA-3.2 8. $1,000,000 board-approved loan to CEO’s personal secretary GA-3.2 9. $1,200,000 computer system purchase; $44,053,000 credit withdrawal. GA-3.2 10. $810,000 retroactive cash dividend GA-3.3 11. $12,000,000 class action lawsuit GA-3.3
Audit Action Recommendations
1. Assess whether or not Apollo Shoes, Inc used proper accounting methods and procedures to record revenue; Search for signs of accelerated recognition of revenues. 2. Question management about the decision to produce their product in-house. Obtain external evidence supporting Apollo’s acquisition of $1,300,000 equipment. (Vendor invoice, etc.) 3. Question management’s decision to award outside Board Members $90,000. Compare Board of Directors stipend to stipends awarded to directors of similar companies
4. Verification of increase in current liabilities stemming from the note payable due January 12, 2012 5. Recruit an independent damage appraisal specialist to assess the Shoetown damage caused by the