AUDIT OF RECEIVABLES Flashcards
(5 cards)
Which of the following statements would an auditor most likely add to the negative form of
confirmations of accounts receivable to encourage timely consideration by the recipients?
A. “This is not a request for payment; remittances should not be sent to our auditors in
the enclosed envelope.”
B. “Report any differences on the enclosed statement directly to our auditors; no reply is
necessary if this amount agrees with your records.”
C. “If you do not report any differences within fifteen days, it will be assumed that this
statement is correct.”
D. “The following invoices have been selected for confirmation and represent amounts that
are overdue.”
CC
Auditors may use positive or negative forms of confirmation requests for accounts
receivable. An auditor most likely will use
A. The positive form to confirm all balances regardless of size.
B. A combination of the two forms, with the positive form used for large balances and the
negative form for the small balances.
C. A combination of the two forms, with the positive form used for trade receivables and
the negative form for other receivables.
D. The positive form when the combined assessed level of inherent and control risk for
assertions related to receivables is acceptably low, and the negative form when it is
unacceptably high.
BBB
The negative request form of accounts receivable confirmation may be used when the :
1)Combined Assessed
Level Of Inherent and Control Risk is ____
2)Number of Small balances is _________
3)Consideration By The Recipient Is
A. Low Many Likely
B. Low Few Unlikely
C. High Few Likely
D. High Many Likely
AA
Negative confirmation of accounts receivable is less effective than positive confirmation of
accounts receivable because
A. A majority of recipients usually lack the willingness to respond objectively.
B. Some recipients may report incorrect balances that require extensive follow-up.
C. The auditor cannot infer that all nonrespondents have verified their account information.
D. Negative confirmations do not produce evidence that is statistically quantifiable.
CC
All of the following are examples of substantive tests to verify the valuation of net accounts
receivable except the
A. Recomputation of the allowance for bad debts.
B. Inspection of accounts for current versus noncurrent status in the statement of financial
position.
C. Inspection of the aging schedule and credit records of past due accounts.
D. Comparison of the allowance for bad debts with past records
BB
