Exam 13: Completing tests in the sales and collection cycle: Accounts receivable

In the audit of accounts receivable, list the factors that affect the planned detection risk for tests of details of balances.

The type of confirmation is a major factor affecting sample size when confirming accounts receivable, with negative confirmations normally requiring a larger sample than positive confirmations.

The most important test of details of balances to determine the existence of recorded accounts receivable is:

Confirmations of accounts receivable are useful for evaluating several accounts receivable balance-related audit objectives, including existence, rights, and realisable value.

Which of the following would most likely be detected by an auditor's review of a client's sales cutoff?

The primary purpose of accounts receivable confirmation is to satisfy the:

Discuss three examples of analytical procedures an auditor might perform while auditing the sales and collection cycle.Also discuss the potential misstatement(s)that may be revealed by each analytical procedure.

After items to be confirmed have been selected, the auditor must maintain control of the confirmations until the:

If you were to perform the following audit procedure-review accounts receivable trial balance for large and unusual receivables-what balance-related audit objective would this relate to?

If the results of the analytical procedures are favourable, they will reduce:

Negative confirmations are less expensive and less reliable than positive confirmations.

Which one of the following is NOT an accounts receivable balance-related audit objective?

The accounts receivable balance-related audit objective net realisable value is not affected by assessed control risk for sales or cash receipts.

The following audit procedure tests primarily which balance-related audit objective for accounts receivable: trace accounts from the accounts receivable master file to the aged trial balance.

When the confirmation requests are returned by the customer, in many cases, they are caused by ________ between the client's and the customer's records.

When a customer disagrees with the amount shown on an accounts receivable confirmation, the auditor should not ask the client to reconcile the difference.

The following audit procedure tests primarily which balance-related audit objective for accounts receivable: inquire of management whether there are any related-party loans.

Design and perform tests of controls for the sales and collection cycle is part of which phase of the audit?

For maximum reliability, accounts receivable confirmations should be sent as close to balance date as possible.

For sales, the existence transaction-related objective affects the existence balance-related objective for accounts receivable, but for cash receipts, the existence transaction-related objective affects the completeness balance-related objective for accounts receivable.