Evaluate the following statement: “In many audits in whichaccounts receivable is material, the requirement of confirming customer balances is awaste of time and would not be performed by competent auditors if it were not requiredby auditing standards. When internal controls are excellent and there are a large numberof small receivables from customers who do not recognize the function of confirmation,it is a meaningless procedure. Examples include well-run utilities and retail stores.In these situations, tests of controls and substantive tests of transactions are far moreeffective than confirmations.”
Evaluate the following statement: “In many audits in whichaccounts receivable is material, the requirement of confirming customer balances is awaste of time and would not be performed by competent auditors if it were not requiredby auditing standards. When internal controls are excellent and there are a large numberof small receivables from customers who do not recognize the function of confirmation,it is a meaningless procedure. Examples include well-run utilities and retail stores.In these situations, tests of controls and substantive tests of transactions are far moreeffective than confirmations.”
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Evaluate the following statement: “In many audits in which
accounts receivable is material, the requirement of confirming customer balances is a
waste of time and would not be performed by competent auditors if it were not required
by auditing standards. When internal controls are excellent and there are a large number
of small receivables from customers who do not recognize the function of confirmation,
it is a meaningless procedure. Examples include well-run utilities and retail stores.
In these situations, tests of controls and substantive tests of transactions are far more
effective than confirmations.”
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