Chapter 11 Flashcards
Evidence- Sale recievables cash cycle
What should an auditor do when he/she not receive a respond from the first positive confirmation request?
Auditor should send a second request. The request should be authorized by the client, and should ask the debtor to respond directly to the auditor.
In the confirmation of accounts receivable, the auditor would most likely
Request confirmation of a sample
Customers having year end due balances fail to reply after the second request forms have been mailed to them. Which is the most appropriate alternative audit procedure?
Examine shipping documents.
When customers fail to answer second request of positive confirmation, the account may be in dispute, uncollectible, or fictitious.
The auditor should then apply alternative procedures such as (examination of subsequent cash receipts, shipping documents, and other clients documentation of existence.) to obtain evidence about the validity and accuracy of significant non responding accounts
What would be the most appropriate audit procedure to test the valuation of the collateral of a delinquent loan receivable?
Obtaining a current value appraisal of the collateral.
What provides assurance related to sales?
Evidence related to cash receipts and accounts receivables provides assurance about sales.
cash receipts and accounts receivable has a direct relationship to sales.
What is a bank reconciliation?
Bank reconciliation verifies the agreement of the bank statement obtained directly from the institution, and the amount of cash reported in the financial statement.
These amounts should be equal after adjustment for deposits in transit, outstanding checks, bank charges, etc.
what does a bank reconciliation do?
Documents direct evidence of the year end bank balance.
How do you know which checks illustrates deposits or are in transit?
A deposit or transfer in transit is one recorded in the entities books as a receipt by the balance sheet date, but NOT recorded as a deposit by the bank until the next period.
An auditor may request confirmation of accounts receivable. When is confirmation necessary?
when the combined assessed level of inherent and control risk is high.
What is the purpose of reconciling accounts receivable ledger to the general ledger control account?
To identify transfer misstatements.
