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21 April, 08:05

14-30 (Substantive tests of accounts receivable) The following situations were not discovered by an inexperienced staff auditor in the audit of the Parson Company.

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Answers (1)
  1. 21 April, 08:36
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    1. Several accounts were incorrectly aged in the

    client's aging schedule.

    Procedures: Compare age% to prior year AR - Analytical procedures.

    Assertion: cutoff, Valuation and allocation.

    2. The accounts receivable turnover ratio was far below

    expected results.

    Procedure: AR analytical test: AR/AP, AR turnover, etc.-Analytical procedures.

    Assertion:Completeness, cutoff.

    3. Goods billed were not shipped.

    Procedure: Cutoff test of billing-test the last month invoices. Vouching to the shipping doc.-Inspection of records.

    Assertion: Occurrence, cutoff.

    4. Some year-end sales were recorded in the wrong

    accounting period.

    Procedure: cut off test of billing-test invoices billed subsequent to year end.-Inspection of records

    assertion:Completeness, cutoff

    5. Several sales were posted for the correct amount but to

    the wrong customers in the accounts receivable ledger.

    Procedure: Confirmation of billings-Confirmation

    Assertion: Occurrence.

    6. The allowance for uncollectable accounts was

    understated.

    Procedures: Test the ratio of allowance to old AR and compare to PY.

    -Analytical procedures.

    Assertion:Valuation and allocation

    7. Several sales were entered and posted at incorrect

    amounts.

    Procedures: Confirmation of AR. - Confirmation

    Assertion: Accuracy and valuation

    8. Mathematical errors were made in totaling the accounts

    receivable ledger.

    Procedures: Foot AR aging.-Recalculation

    Assertion: Accuracy and valuation

    9. An unrecorded sale at the balance sheet date was

    collected in the next month.

    Procedure: Post subsequent cash to AR balance at YE. Reperformance. records.

    Assertion: Completeness, cutoff.

    10. Several fictitious sales were recorded.

    Procedure: Confirm customer balance.-Confirmation.

    assertion: Occrrence.

    11. The pledging of some customer accounts as security for

    a loan was not reported in the balance sheet.

    Procedure: Review security agreements.-Inspection of record.

    Assertion: Occurrence and rights and obligations.

    12. Some year-end cash receipts were recorded in the wrong

    accounting period.

    Procedure: cash cutoff testing.-Inspectionof record.

    Assertion: cutoff, occurrence, completeness.
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