Comment on the extent to which results from a negative confirmation may be relied upon to verify the existence of year-end receivable balances and contrast this
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Comment on the extent to which results from a negative confirmation may be relied upon to verify the existence of year-end receivable balances and contrast this to the reliability of the results received from a positive confirmation.
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- When accounts receivable are confirmed at an interim date, auditors need not be concerned witha. Obtaining a summary of receivables transactions from the interim date to the year-end date.b. Obtaining a year-end trial balance of receivables, comparing it to the interim trial balance, and obtaining evidence and explanations for large variations. c. Sending negative confirmations to all customers as of the year-end date.d. Considering the necessity for some additional confirmations as of the balance sheet date if balances have increased materiallyWhich of the following is the best audit procedure for determining the existence of unrecorded liabilities?a. Examine confirmation requests returned by creditors whose accounts are on a subsidiary trial balance of accounts payable.b. Examine a sample of cash disbursements in the period subsequent to year-end.c. Examine a sample of invoices a few days prior to and subsequent to the year-end to ascertain whether they have been properly recorded.d. Examine unusual relationships between monthly accounts payable and recorded purchases.An auditor is required to confirm accounts receivable if the accounts receivable balances area. Older than the prior year.b. Material to the financial statements.c. Smaller than expected.d. Subject to valuation estimates.
- Which of the following would provide an auditor with the most reliable evidence reguarding the existence of accounts receivable? A. A copy of the invoice sent to the customer. B. Acopy of the customer's sales order held by the client. C. An accounts receivable confirmation received by the auditor from the client's customer. D. An aging schedule showing the composition of the year-end-accounts receivable balance.Which of the following procedures provides the most relevant information to determine the adequacy of the allowance for doubtful accounts receivable? A. Confirm the receivables. B. Test the controls over the write-off of accounts receivable to ensure that management approves all write-offs. Ⓒ Analyze the following month's payments on the accounts receivable balances outstanding. D. Analyze the allowance through an aging of receivables and an analysis of current economic data.Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? O Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. O Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. O Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.
- Which of the following procedures is MOST likely to be performed before the balance sheet date? a. Determine the date of the Letter of Representations b. Make a legal determination whether fraud has occurred. c. Search for unrecorded liabilities. d. Confirmation of receivables. e. Updating the predecessor's audit report date.Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? A. Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices. B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable balance. C. Scan the cash disbursement entries recorded just before year end for indications of unusual transactions. D. Vouch a sample of accounts payable entries recorded just before year end to the unmatched receiving report file.In verifying accounts payable, it is common to restrict the auditsample to a small portion of the population items, whereas in auditing accrued property taxes,it is common to verify all transactions for the year. Explain the reason for the difference.
- Choose the one correct answer Which of the following statements is valid relating to confirmation of accounts receivable? * a. A positive confirmation provides more reliable evidence than the negative confirmation because the auditor can perform follow-up procedures if no response is received from the debtorB. A negative form of confirmation is preferable to use when individual account balances of customers are relatively largec. In positive confirmation, failure to reply must be regarded as a correct response, even though the debtor may have ignored the confirmation requestd. An auditor must consider using the negative form of confirmation when there is reason to believe that there may be a substantial number of accounts in dispute or with inaccuracies or irregularitiese. None of the aboveA client uses percentages of aging categories to calculate the allowance for doubtful accounts. When auditing the allowance for doubtful accounts, the auditor must… choose one: Ensure that the client’s aging categories are consistent with industry averages. Ensure that the client has calculated the allowance for the current and all prior years using the same percentages for uncollectible accounts. Perform tests to ensure that the aging categories are accurate. Perform tests to ensure that management has not exercised judgment when calculating the allowance for doubtful accounts.A client uses percentages of aging categories to calculate the allowance for doubtful accounts. When auditing the allowance for doubtful accounts, the auditor must… Question 4 options: Ensure that the client’s aging categories are consistent with industry averages. Ensure that the client has calculated the allowance for the current and all prior years using the same percentages for uncollectible accounts. Perform tests to ensure that the aging categories are accurate. Perform tests to ensure that management has not exercised judgment when calculating the allowance for doubtful accounts.
