Chapter 16

Question 1

accounts receivable balance-related audit objectives

Answer 1

1. A/R in the aged trial balance agree with related master file amounts, and the total is added correctly and agrees with G/L(Detail tie in)
2. Recorded A/R exist(completeness)
3. Existing A/R are included(Completeness)
4. A/R are accurate (classification)
5. A/R are correctly classified (classification)
6. Cutoff for accounts receivable is correct (Cutoff)
7. Accounts receivable is stated at realizable value (realizable value)
8. The client has rights to accounts receivable (rights)

Question 2

aged trial balance

Answer 2

lists the balances in the a/r master file at the balance sheet date, including individual customer balances outstanding and a breakdown of each balance

Question 3

timing difference

Answer 3

shipments and payments in due process at the end of the year

Question 4

realizable value of accounts receivable

Answer 4

equals gross accounts receivable less the allowance for uncollectible accounts

Question 5

positive confirmation

Answer 5

communicated addressed to the debtor requesting the recipient to confirm directly whether the balance as stated on the confirmation request is correct or incorrect

Question 6

invoice confirmation

Answer 6

positive confirmation where an individual invoice is confirmed

Question 7

negative confirmation

Answer 7

also addressed to the debtor but requests a response only when the debtor disagrees with the stated amount

1. assess risk of material misstatement
2. made up of a large number of small problems
3. auditor expects a low exception rate
4. the auditor reasonably believes that recipients of negative confirmation will give the requests adequate consideration

Question 8

alternative procedures

Answer 8

other procedures to verify stuff