The owner of ABC Co. has asked your to look into a possible issue with the company’s travel expen…

 

The owner of ABC Co. has asked your to look into a possible issue with the company’s travel expenses. They have provided you with this year and last year’s financial statements and the detail for the travel expense account. You will be conducting some audit procedures for ABC Co. and analyzing the results. The company has 4 sales managers that travel on a regular basis: Catherine Ames, Brody Callina, Doug Gartner, and Ustis Soizuka. The company has issued each of these employees a company Mastercard to be used for business expenses when traveling. PROJECT REQUIREMENTS: • 1-Review the financial statements given to you by the owner of ABC Co.. Based on the AICPA Code of Professional Conduct prepare a page summary of how you plan to proceed to address the owner’s concerns and what specific steps you would take to audit this company. ABC Company Statements of Income For the year ended December 31, 2017 2016 Net Sales (less returns & allowances) $        930,560 $        875,693 6% Cost of Goods Sold            623,543            585,625 6% Gross Margin            307,017            290,068 6% Operating Expenses:      Advertising                 1,843                 1,972 -7%      Bad Debt Expense              17,683              13,923 27%      Depreciation and Amortization              14,095              12,870 10%      Dues & Subscriptions                    364                    375 -3%      Insurance                 2,800                 2,600 8%      Licenses & Fees                    300                    285 5%      Marketing & Promotion              10,925              11,452 -5%      Meals and Entertainment                 4,512                 3,985 13%      Office Expenses                 1,611                 1,543 4%      Office Supplies                 2,000                 2,035 -2%      Salaries & Wages              45,800              42,700 7%      Professional Fees                 3,700                 3,500 6%      Property Taxes                 1,920                 1,900 1%      Rent              42,500              41,800 2%      Repairs & Maintenance                    700                    680 3%      Shipping Delivery                    450                    570 -21%      Travel Expenses              41,862              35,587 18%      Utilities                 7,300                 6,950 5%      Leased Equipment                 4,400                 4,750 -7%      Other                    665                    654 2% Total Operating Expenses            205,430            190,131 8% Operating Income            101,587              99,937 2% Interest Expense                 2,658                 2,432 9% Other Income (interest, royalties)                 5,620                 5,725 -2% Income Before Taxes            104,549            103,230 1% Income Taxes              20,910              20,646 1% Net Income $          83,639 $          82,584 1%