Identify Departures from GAAP. The balance sheet and statement of activities for the Central Area Disadvantaged Youth Center for fiscal year 2011, prepared by a volunteer accountant with business experience, are presented on the following page.
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CENTRAL AREA DISADVANTAGED YOUTH CENTER Balance Sheet As of December 31, 2011 |
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Assets |
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Cash |
$ 26,802 |
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Investments |
71,143 |
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Contributions receivable |
16,372 |
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Supplies and other prepaid expenses |
13,258 |
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Land |
70,000 |
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Buildings (net of accumulated depreciation of $63,420) |
249,750 |
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Equipment (net of accumulated depreciation of $87,642) |
184,230 |
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Total assets |
$631,555 |
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Liabilities and net assets |
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Liabilities |
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Accounts payable |
$ 25,722 |
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Accrued liabilities |
4,963 |
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Total liabilities |
30,685 |
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Net assets |
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Invested in property, plant, and equipment |
503,980 |
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Other net assets |
96,892 |
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Total net assets |
600,870 |
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Total liabilities and net assets |
$631,555 |
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CENTRAL AREA DISADVANTAGED YOUTH CENTER Statement of Activities For Year Ended December 31, 2011 |
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Revenues and contributions |
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Contributions from donors |
$ 69,250 |
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Grants: |
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From United Way |
15,000 |
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From state government |
22,000 |
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Contributed goods and services |
43,500 |
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Interest on investments |
3,200 |
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Miscellaneous—Sale of refurbished goods |
6,900 |
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Total revenues and contributions |
159,850 |
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Expenses |
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Payroll |
62,580 |
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Payroll taxes |
4,605 |
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Travel and conferences |
2,795 |
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Promotion and advertising |
1,430 |
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Cost of donated goods and services |
32,600 |
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Food, recreational, and other supplies |
18,310 |
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Postage, printing, and copying |
1,057 |
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Building and equipment maintenance |
3,100 |
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Utilities |
4,378 |
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Depreciation |
12,700 |
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Miscellaneous |
10,380 |
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Total expenses |
153,935 |
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Increase in net assets |
5,915 |
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Net assets, December 31, 2010 |
625,640 |
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Net assets, December 31, 2011 |
$ 631,555 |
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Required
a. Assume that you are the independent auditor performing a financial statement audit of the center. Identify and make a list of your concerns based on your review of the center’s financial statements. Would you feel comfortable issuing an unqualified (i.e., “clean”) opinion on the Central Area Disadvantaged Youth Center’s financial statements?
b. What actions would you require of the center’s management to address your concerns before you would be willing to perform this audit? What would be your recourse if the center refused to take the recommended actions?