Copyright 2020 Deloitte Development LLC All Rights Reserved. Case 20-10 — Handout 2 Auditing Logistical Logistics — Internal Control Matrix — Lease Process Control No. Control Title Control Description L 1 Contract Review — Contract database is reviewed by each department leader. On a quarterly basis, each department leader (e.g., Sales, Treasury, Human Resources, IT, Tax), with appropriate knowledge of the contracts entered into by his or her department, reviews the database to verify that (1) all contracts (i.e., new, existing, or modified), in accordance with the entity’s accounting policies, have been included in the database and (2) all events or circumstances requiring reassessment have been identified. Each department leader provides representation to the Lease Accountant of the completeness and accuracy of the database, as well as, the contracts identified that require reassessment to the best of his or her knowledge. L 2 Lease Terms Review — Controller reviews and approves the key contract terms entered into the lease software. The Controller, with appropriate knowledge of the entity’s lease arrangements and the accounting framework and principles under the requirements of ASC 842, reviews the contract listing (e.g., contract database extract) to verify that all the key contract terms for the entity’s lease arrangements were entered by the Lease Accountant into the lease software. The Controller will verify the completeness and accuracy of the contract listing (e.g., contract database extract) by reviewing key terms against the lease contracts. Any differences identified as a result of the Controller’s review are investigated and resolved, and all questions are addressed. The Controller then approves and signs off on the contract listing (e.g., contract database extract). L 3 Review of Reconciliations — Controller reviews and approves all general ledger reconciliations for the lease specific accounts. The Controller reviews the lease account balance reconciliations, on a quarterly basis, along with the detailed lease analysis supporting the amounts recorded, as prepared by the Lease Accountant. After performing the review, any differences identified as a result of the review are investigated and resolved, and all questions are addressed. The Controller then approves and signs off on the lease account balance reconciliations. Handout 2: Auditing Logistical Logistics Page 2 Copyright © 2020 Deloitte Development LLC All Rights Reserved. Control No. Control Title Control Description L 4 Lease Review — Controller reviews contract terms and approves the accounting conclusion memo. An analysis of the accounting conclusion memo for the contract is prepared by the Lease Accountant, who submits it (along with the contract) to the Controller, who has appropriate knowledge of the entity’s lease arrangements and the accounting framewo ...

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All Rights Reserved.
Case 20-10 — Handout 2
Auditing Logistical Logistics — Internal Control Matrix —
Lease Process
Control
No. Control Title Control Description
L 1 Contract Review —
Contract database is
reviewed by each
department leader.
On a quarterly basis, each department leader (e.g.,
Sales, Treasury, Human Resources, IT, Tax), with
appropriate knowledge of the contracts entered into by
his or her department, reviews the database to verify
that (1) all contracts (i.e., new, existing, or modified), in
accordance with the entity’s accounting policies, have
been included in the database and (2) all events or
circumstances requiring reassessment have been
identified. Each department leader provides
representation to the Lease Accountant of the
completeness and accuracy of the database, as well as,
the contracts identified that require reassessment to the
best of his or her knowledge.

2. L 2 Lease Terms Review
— Controller reviews
and approves the key
contract terms entered
into the lease
software.
The Controller, with appropriate knowledge of the
entity’s lease arrangements and the accounting
framework and principles under the requirements of
ASC 842, reviews the contract listing (e.g., contract
database extract) to verify that all the key contract
terms for the entity’s lease arrangements were entered
by the Lease Accountant into the lease software. The
Controller will verify the completeness and accuracy of
the contract listing (e.g., contract database extract) by
reviewing key terms against the lease contracts. Any
differences identified as a result of the Controller’s
review are investigated and resolved, and all questions
are addressed. The Controller then approves and signs
off on the contract listing (e.g., contract database
extract).
L 3 Review of
Reconciliations —
Controller reviews and
approves all general
ledger reconciliations
for the lease specific
accounts.
The Controller reviews the lease account balance
reconciliations, on a quarterly basis, along with the

3. detailed lease analysis supporting the amounts
recorded, as prepared by the Lease Accountant. After
performing the review, any differences identified as a
result of the review are investigated and resolved, and
all questions are addressed. The Controller then
approves and signs off on the lease account balance
reconciliations.
Handout 2: Auditing Logistical Logistics Page 2
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Control
No. Control Title Control Description
L 4 Lease Review —
Controller reviews
contract terms and
approves the
accounting conclusion
memo.
An analysis of the accounting conclusion memo for the
contract is prepared by the Lease Accountant, who
submits it (along with the contract) to the Controller,
who has appropriate knowledge of the entity’s lease
arrangements and the accounting framework and
principles under the requirements of ASC 842. The

4. Controller reviews the contract to determine whether
the contract is or contains a lease (or whether it is
identified as a sale and leaseback transaction) and if so,
the classification of such lease within the scope of ASC
842. The Controller’s review of each contract and
accounting conclusion memo includes the following:
Step 1— Read the relevant terms of the contract to
determine whether the criteria for a contract to be
accounted for as a lease under ASC 842 has been met.
a. The contract gives the customer the right to
control the use of the identified property, plant,
and equipment for a period in exchange for
consideration. Control is considered to exist if
the customer has both of the following: (1) the
right to obtain substantially all of the economic
benefits from use of an identified asset and
(2) the right to direct the use of that asset.
b. A capacity portion of an asset is an identified
asset if it is physically distinct. A capacity or
other portion of an asset that is not physically
distinct is not an identified asset, unless it
represents substantially all of the capacity of the
asset and thereby provides the customer with the
right to obtain substantially all of the economic
benefits from use of the asset.
The Controller also reviews the contract to determine
whether each separate lease and nonlease component
within the contract has been properly identified.
Step 2 — Read the relevant terms of the contract to
determine the classification of the lease as of the lease

5. commencement date. This evaluation focuses on
whether control of the underlying asset is effectively
transferred to the lessee. A lease would be classified as
Handout 2: Auditing Logistical Logistics Page 3
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Control
No. Control Title Control Description
a finance lease from the perspective of a lessee if any of
the following criteria are met:
a. The lease transfers ownership of the underlying
asset to the lessee by the end of the lease term.
b. The lease grants the lessee an option to purchase
the underlying asset that the lessee is reasonably
certain to exercise.
c. The lease term is for the major part of the
remaining economic life of the underlying asset.
d. The present value of the sum of the lease
payments and any residual value guaranteed by
the lessee equals or exceeds substantially all of
the fair value of the underlying asset.
e. The underlying asset is of such a specialized
nature that it is expected to have no alternative

6. use to the lessor at the end of the lease term.
Leases that do not meet any of these criteria (i.e., a
lease in which the lessee does not effectively obtain
control of the underlying asset) would be classified as
operating leases by the lessee.
Step 3 — Read the relevant terms of the contract for the
proper identification of a sale and leaseback transaction,
on the basis of whether the asset transfer represents a
sale in accordance with ASC 842. If so, determine the
appropriate classification of the leaseback transaction in
accordance with ASC 842.
After each review step is performed, any differences
identified as a result of the review are investigated and
resolved, and all questions are addressed. The
Controller then approves and signs off on the
accounting conclusion memo and submits all lease
contracts to the Lease Accountant for entry into the
lease software for calculating and accounting for the
lease.
L 5 Journal Entry
Approval —
Controller reviews and
approves the journal
entries and supporting
documentation.
The Controller reviews and approves the manual
journal entries and supporting documentation prepared
by the Lease Accountant. The Lease Accountant is
responsible for posting the entries following the

7. Controllers’ approval. Copies of each entry posted to
the general ledger are retained, including supporting
Handout 2: Auditing Logistical Logistics Page 4
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Control
No. Control Title Control Description
documentation. Any differences identified as a result of
the Controller’s review are investigated and resolved,
and all questions are addressed. The Controller then
approves and signs off on the manual journal entries
and documentation reviewed, which would include a
detailed lease analysis with the relevant lease terms,
discount rate and lease payments, as well as other
supporting documentation.
L 6 Long-Lived Asset
Impairment —
Controller reviews and
approves the quarterly
long-lived asset
impairment memo.
The Controller reviews the quarterly long-lived asset
impairment memo, prepared by the Lease Accountant,
to identify whether the carrying amount of any long-

8. lived assets (including ROU assets) may not be
recoverable (i.e., identification of triggering events) that
would necessitate an undiscounted cash flow analysis.
The quarterly long-lived asset impairment memo
includes (1) a review of applicable U.S. GAAP
guidance (ASC 360), (2) evaluation of present business
and market conditions, and (3) a conclusion on whether
a triggering event is present. Any differences identified
as a result of the Controller’s review are investigated
and resolved, and all questions are addressed. The
Controller then approves by signing off on the long-
lived asset impairment memo.
Do you feel the benefits of cloud computing are worth the
threats and vulnerabilities? Have we arrived at a point where we
can trust external agencies to secure our most precious data?
Please explain your answer.
essay in 300 words.
3 references.

9. what are Information Security Standards and why are they
important.
Write 4 page(1200 words) paper in APA format.
5 references
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Case 20-10 — Handout 1
Auditing Logistical Logistics — Risks of Material Misstatement
(RoMMs) — Leases
RoMM

10. No. RoMM Description
1 Right-of-use (ROU) assets and lease liabilities are not valued
correctly, on the basis of the underlying assumptions (e.g., lease
terms, discount rate, lease payments) and classification of the
lease (i.e., operating or financing).
2 Lease expense recorded does not represent valid expense.
3 Contracts or arrangements containing a lease are not
identified as
a lease.
4 The lease is not appropriately classified on the basis of the
criteria under ASC 842.
5 The entity identifies ROU assets and lease liabilities for
which it
does not have the rights or obligations to.
6 Contracts or arrangements are determined to be a lease when
the
criteria under ASC 842 have not been met.
7 Impairment indicators may exist for ROU assets, but are not
known to management.
8 Lease expense is not recorded (1) at correct amounts, (2) in
the
proper accounts, or (3) in the proper period.

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Case 20-10
Auditing Logistical Logistics
Background
Logistical Logistics Inc. (Logistical Logistics or the
“Company”) provides transportation and
logistics services to customers throughout a network of offices
in North America, South
America, and Asia. The Company contracts fleets of shipping
vessels, trucks, and aircraft to
provide regional, long-haul, and international shipments of
customer goods. In addition, the
Company contracts warehouse operators across North America
for use of their facilities as
distribution centers that temporarily store goods in transit.
Assume the Company has adopted the
new leasing standard, ASC 842, Leases.
The Company has entered into the following contracts with the
vendors identified below.
Logistical Logistics enters into a contract with See Boat Inc.
(See Boat) to use its shipping
vessels to transport customer goods from North America to
Asia. See Boat has a fleet of 25
multi-use shipping vessels, each of which has the capacity to
hold 1,000 shipping containers.
Logistical Logistics enters into a contract with Fly-By-Air Inc.
(Fly-By-Air) to use its aircraft to

12. transport customer goods from South America to North
America. Fly-By-Air has a fleet of 50
multi-use aircraft, each of which has the capacity to hold 500
shipping pallets of customer goods.
Logistical Logistics enters into a contract with Trucking Co.
Inc. (Trucking Co.) to use its trucks
to transport customer goods from distribution centers to retail
stores across North America.
Trucking Co. has a fleet of 1,500 multi-use long-haul trucking
carriers, each of which has the
capacity to hold 100 shipping pallets of goods.
Logistical Logistics enters into a contract with Warehouse Co.
Inc. (Warehouse Co.) to store up
to 18,000 shipping pallets of customer goods at one of
Warehouse Co.’s locations. Warehouse
Co. has the capacity to store 20,000 shipping pallets of goods.
The terms of the shipping contracts are as follows:
• See Boat
o The contract term is for the voyage to transport Logistical
Logistics’ cargo from
Los Angeles to Shanghai. Logistical Logistics does not have
discretion to change
the departure or arrival ports without a renegotiation of the
contract fees.
o SB0829, a commercial shipping vessel in See Boat’s fleet, is
dedicated to
delivering Logistical Logistics’ cargo for the term of the
contract. See Boat
cannot substitute SB0829 with another vessel in its fleet.

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o The contract identifies the shipping containers and acceptable
cargo (e.g.,
semiconductors) to be transported on the ship as well as the
transportation route.
Logistical Logistics does not have discretion to change the
identified cargo
without renegotiating the contract fees.
o See Boat is responsible for the safe passage of the cargo, as
well as operation and
maintenance of SB0829. The crew determines the ship’s route,
speeds, and date of
departure from Los Angeles. In addition, Logistical Logistics
cannot, under any
circumstances, replace See Boat’s crew.
• Fly-By-Air
o The contract term is five years.
o FBA1231, a commercial aircraft in Fly-By-Air’s fleet, is
dedicated to delivering
Logistical Logistics’ shipping pallets during the term of the
contract.
o Logistical Logistics determines (1) the airports from and to
which goods are
shipped and received and (2) the order in which deliveries are
made to the
airports. Fly-By-Air provides the aircraft’s pilot and crew, and
Logistical

14. Logistics instructs Fly-By-Air accordingly.
o While Logistical Logistics determines what cargo will be
transported throughout
the term of the contract, certain restrictions prevent the
Company from shipping
flammable materials.
o Logistical Logistics has the right to send the aircraft
regardless of whether its
cargo levels meet the full storage capacity of the aircraft. If
FBA1231 is below
capacity, Fly-By-Air cannot use the excess storage space to ship
products of its
other customers.
• Trucking Co.
o The contract term is five years.
o Trucking Co. must deliver Logistical Logistics’ shipments
within three weeks of
the Company’s notification that it has pallets of customer goods
ready for
shipping.
o Trucking Co. may choose any truck from its fleet to fulfill the
shipping request.
o Logistical Logistics may request shipment of 25 to 100
shipping pallets of goods
in a single request. (Individual shipping requests generally do
not exceed 50
shipping pallets.)
o Trucking Co. has the right to use any excess storage space to

15. ship products of its
other customers.
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o Trucking Co. determines the shipment’s delivery date (within
the three-week
period), as well as the shipping route.
• Warehouse Co.
o The contract term is 10 years.
o Logistical Logistics can store up to 18,000 shipping pall ets at
one specified
Warehouse Co. location. Logistical Logistics will be charged
for storage of
18,000 shipping pallets, regardless of the actual number of
pallets stored, and
Warehouse Co. cannot use any of Logistical Logistics’ unused
storage space for
other storage needs.
o Warehouse Co. can use the remaining space in its warehouse
for other storage
needs.
o Warehouse Co. cannot relocate Logistical Logistics’ inventory
to another facility.
o Logistical Logistics has the right to decide which shipping
pallets are placed in
storage and when they can be removed.

16. o Warehouse Co. provides the loading and unloading services
for the warehouse
activities, both of which are dependent on Logistical Logistics’
decisions about
which shipping pallets are placed in storage and when they can
be removed.
The CFO of Logistical Logistics recognizes that the new leasing
standard contains certain
provisions that may affect how the Company treats contracts of
this nature.
Note that you have been provided with Handout 1, which
contains the risks of material
misstatement (RoMMs) matrix, and Handout 2, which is
Logistical Logistics’ control matrix.
Required Activities:
1. On the basis of the facts related to the contracts between the
Company and its vendors,
what are the RoMMs that we may identify as part of our audit to
address the
completeness and existence of those contracts that are or
contain a lease? Handout 1, the
RoMMs matrix, may be used to assist with identifying relevant
RoMMs.
2. Tailoring RoMMs to the specific lease contracts and
assertions is an important step in
designing an audit plan for leases. Now that you have identified
the RoMMs that are
applicable to the contracts between the Company and its
vendors, how might you tailor
the RoMMs that you identified in Activity 1 to the facts

17. presented in this case?
3. Identify internal controls that address the tailored RoMMs
identified in Activity 2.
Handout 2, Logistical Logistics’ internal control matrix, may be
used to assist with
identifying relevant internal controls.
4. Design substantive procedures that address the tailored
RoMMs identified in Activity 2.