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

Which one of the following circumstances would indicate that negative confirmations should NOT be used on an engagement?

When no reply to a positive confirmation is received, the auditor:

Each auditee misstatement of accounts receivable must be analysed to determine whether it:

Most tests of accounts receivable and the allowance for uncollectible accounts are based on the:

Which of the audit objectives is performed first when doing the tests of details of balances for accounts receivable?

It is common to use a combination of positive and negative confirmations by sending the latter to accounts with large balances and the former to those with small balances.

Explain two particular matters for the presentation and disclosure assertion for accounts receivable balances.

What is the advantage of using the negative form of confirmations?

What is a common reported type of difference regarding confirmations?

The following audit procedure tests primarily which balance-related audit objective for accounts receivable: review the minutes of the board of directors meetings for any indication of pledged receivables.

It is easy to test for a cash receipts cutoff error by:

The most reliable evidence from confirmations is obtained when they are sent:

Returns of positive confirmation requests for accounts receivable were very poor.As an alternative procedure, the auditor decided to check subsequent collections.The auditor had satisfied himself that the client satisfactorily listed the customer name next to each cheque listed on the deposit slip; hence, he decided that for each customer from whom a confirmation was not received, he would add all amounts shown for that customer on each validated deposit slip for the two months following the balance sheet date.The major fallacy in the auditor's procedure is that:

When do cutoff mistakes most commonly occur?

State the eight specific balance-related audit objectives as applied to accounts receivable.

The allowance for doubtful debts account is capable of precise calculation.

Comparing the provision for doubtful debts as a percentage of accounts receivable with previous years can help detect errors in the bad debts expense account.

Discuss the alternative procedures an auditor can perform to test the existence objective for accounts receivable when customers do not respond to confirmation requests.

The auditor should evaluate the qualitative nature of misstatements found in a sample of debtors' confirmations:

This year is the first time that, as a normal practice in a client's business, accounts receivable may be pledged, assigned, factored, or sold at discount.The audit procedure which would disclose these practices is: