A4 N Flashcards
EXAMPLE when credit sales transactions are not recorded (unrecorded sales) :
Shipping documents without corresponding sales journal entries might indicate unrecorded sales
Tracing from invoices to shipping documents would provide evidence that
sales billed to customers were actually shipped
fictitious sales example
An invoice for which the corresponding shipping documents could not be located
(i.e., sales that were recorded but never actually shipped).
Tracing from a sample of shipping documents to matching sales invoices… would provide evidence that
goods shipped are properly billed
(completeness assertion for billing)
Shipping documents provide evidence that:
sale occurred
I.e. to test failure to prepare sales invoice selecting from shipping documents allows the auditor to test whether corresponding invoices exist for each sale.
EXAMPLE of inappropriate segregation of duties
The cash receipts clerk credits customer accounts when payment is received.
The cash receipts clerk should not have both recordkeeping responsibilities and custody of assets.
Tracing shipping documents to prenumbered sales invoices provides evidence that:
Shipments to customers were properly invoiced.
Tracing bills of lading to sales invoices provides evidence that:
Shipments to customers were invoiced.
In evaluating the adequacy of the allowance for doubtful accounts, an auditor most likely reviews the entity’s aging of receivables to support management’s financial statement assertion of:
Valuation and allocation.
Which of the following management assertion is most closely related to the audit objective that verifies all sales have been recorded?
Completeness.
Existence assertion during an audit of accounts receivable
Send confirmations to customers.
detect the overstatement of sales, the auditor should trace transactions from the:
Sales journal to the shipping documents.
Negative & Positive Confirmations
Positive confirmation
The recipient is requested to respond with confirmation or reply to the stated information, regardless of whether it is correct.
(because the auditor cannot infer that all nonrespondents have verified their account information.)
Negative confirmation
The recipient is only requested to respond if they disagree with the stated information.
Two assertions for which confirmation of accounts receivable balances provides primary evidence are:
Rights and obligations and existence.
rights and obligations (does the client have a right to the receivable?) and existence (does the receivable really exist?).
Under which of the following circumstances would using the blank form of confirmation of accounts receivable most likely be preferable to other types of positive confirmations?
Recipients are likely to sign other types of positive confirmations without careful investigation.
Como las positivas las firmas sin revisar. Entonces las mandan negativas para que solo respondan si no estan deacuerdo y x lo menos la leen
The auditor should be aware that the blank form of positive confirmation may be ineffective because:
Few responses may occur because more effort is required of recipients.
Sending positive confirmations to all of the client’s customers with balances on December 31. is an example of?
To identify the fraud in accounts receivables related to fictitious customers.
When an auditor does not receive replies to positive requests for year-end accounts receivable confirmations, the auditor most likely would:
Ask the client to contact the customers to request that the confirmations be returned.
Which of the following circumstances most likely would cause an auditor to believe that material misstatements may exist in an entity’s financial statements?
Accounts receivable confirmation requests yield significantly fewer responses than expected.
A lower than expected response rate could be indicative of fictitious customer accounts.
An audit client has a valid reason for requesting that a certain account receivable that the auditor has selected for confirmation not be confirmed. Under these circumstances, the auditor should:
Verify the account balance by inspecting the client’s bank statements and cash receipt records.
OJO: no es como en la vida real que tenemos que consultar y que lo tiene que poner en el MNGMT letter. SEGUN guidance An acceptable alternative procedure for accounts receivable confirmations is verifying account balance by inspecting the client’s bank statements and cash receipt records.
Weakness in AP Procedures
Purchase orders should be issued by the purchasing department, not the accounts payable department.
AP/EXPENSE process flow:
Responsible for preparing:
> purchase order - Purchasing DPT
> Matching the receiving report and invoice with the purchase order= AP DPT
> paying for the related purchase= Treasury DPT
AP department generally should:
Establish the agreement of the vendor’s invoice with the receiving report and purchase order.
In other words: ensure that supporting documents (invoice, receiving report, and purchase order) are in agreement before the voucher is submitted for payment.
To provide assurance that each voucher is submitted and paid only once
Stamped “paid” by the check signer.
stamping the voucher “paid,” the check signer cancels the voucher so it cannot be resubmitted for payment.
