Required: Your client is All's Fair Appliance Company, an appliance wholesaler. Select the most appropriate audit procedure from the following list and enter the number in the appropriate place on the grid. (Each audit procedure will be used once and only once.) Audit Procedure: 1. Review of bank confirmations and loan agreements. 2. Review of drafts of the financial statements. 3. Select a sample of shipping documents, match them with related sales invoices, and determine that they have been included in the sales journal and accounts receivable subsidiary ledger. 4. Select a sample of shipping documents for a few days before and after year-end. 5. Confirmation of accounts receivable. 6. Review of aging of accounts receivable with the credit manager. Answer is complete but not entirely correct. Assertion a. Ensure that the entity has legal title to accounts receivable (rights and obligations). b. Determine that recorded accounts receivable include all amounts owed to the client (completeness). c. Verify that all accounts receivable are recorded in the correct period (cutoff). d. Ensure that the allowance for uncollectible accounts is properly stated (accuracy, valuation, and allocation). e. Confirm that recorded accounts receivable are valid (existence). f. Ensure that all revenue-related disclosures are made in the financial statements. Audit Procedure 2 3 4 1 6 5
Required: Your client is All's Fair Appliance Company, an appliance wholesaler. Select the most appropriate audit procedure from the following list and enter the number in the appropriate place on the grid. (Each audit procedure will be used once and only once.) Audit Procedure: 1. Review of bank confirmations and loan agreements. 2. Review of drafts of the financial statements. 3. Select a sample of shipping documents, match them with related sales invoices, and determine that they have been included in the sales journal and accounts receivable subsidiary ledger. 4. Select a sample of shipping documents for a few days before and after year-end. 5. Confirmation of accounts receivable. 6. Review of aging of accounts receivable with the credit manager. Answer is complete but not entirely correct. Assertion a. Ensure that the entity has legal title to accounts receivable (rights and obligations). b. Determine that recorded accounts receivable include all amounts owed to the client (completeness). c. Verify that all accounts receivable are recorded in the correct period (cutoff). d. Ensure that the allowance for uncollectible accounts is properly stated (accuracy, valuation, and allocation). e. Confirm that recorded accounts receivable are valid (existence). f. Ensure that all revenue-related disclosures are made in the financial statements. Audit Procedure 2 3 4 1 6 5
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Required:
Your client is All's Fair Appliance Company, an appliance wholesaler. Select the most appropriate audit procedure from the following
list and enter the number in the appropriate place on the grid. (Each audit procedure will be used once and only once.)
Audit Procedure:
1. Review of bank confirmations and loan agreements.
2. Review of drafts of the financial statements.
3. Select a sample of shipping documents, match them with related sales invoices, and determine that they have been included in the
sales journal and accounts receivable subsidiary ledger.
4. Select a sample of shipping documents for a few days before and after year-end.
5. Confirmation of accounts receivable.
6. Review of aging of accounts receivable with the credit manager.
Answer is complete but not entirely correct.
Assertion
a. Ensure that the entity has legal title to accounts receivable (rights and obligations).
b. Determine that recorded accounts receivable include all amounts owed to the client (completeness).
c. Verify that all accounts receivable are recorded in the correct period (cutoff).
d. Ensure that the allowance for uncollectible accounts is properly stated (accuracy, valuation, and allocation).
e. Confirm that recorded accounts receivable are valid (existence).
f. Ensure that all revenue-related disclosures are made in the financial statements.
Audit Procedure
2
3
4
1
6
5
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