You have been assigned to the first audit of the Chicago Companyfor the year ending March 31, 2013. Accounts receivable were confirmed on December 31,2012, and at that date the receivables consisted of approximately 200 accounts withbalances totaling $956,750. Fifty of these accounts with balances totaling $650,725 wereselected for confirmation. All but 10 of the confirmation requests have been returned; 24were returned without any exceptions, 6 had minor differences that have been clearedsatisfactorily, and 10 confirmations had the following information and comments:1. We are sorry, but we cannot answer your request for confirmation of our accountas the PDQ Company uses an accounts payable voucher system and can onlyconfirm individual invoices.2. The balance of $1,050 was paid on December 28, 2012.3. The balance of $7,750 was paid on January 5, 2013.4. The balance of $2,975 was paid on December 13, 2012.5. We do not owe you anything at December 31, 2012, as the goods, represented byyour invoice dated December 30, 2012, number 25050, in the amount of $11,550,were received on January 5, 2013, on FOB destination terms.6. An advance payment of $2,500 made by us in November 2012 should cover the twoinvoices totaling $1,350 shown on the statement attached.7. This confirmation was returned as undeliverable by the post office.8. We are contesting the propriety of this $12,525 charge. We think the charge isexcessive.9. We do not owe this balance as our agreement with the company allows us to returnany unsold goods without penalty. Amount okay. As the goods have been shippedto us on consignment, we will remit payment upon selling the goods.10. Your credit memo dated December 5, 2012, in the amount of $440 cancels thebalance above.a. Indicate which of these confirmation responses likely represent timing differences.b. Which of the ten confirmation responses likely represent a misstatement? Explainwhy the response indicates a misstatement.c. For each of the 10 confirmation responses, indicate the procedures you wouldperform to determine whether the exception is a misstatement or has beenappropriately recorded by the client.
You have been assigned to the first audit of the Chicago Company
for the year ending March 31, 2013. Accounts receivable were confirmed on December 31,
2012, and at that date the receivables consisted of approximately 200 accounts with
balances totaling $956,750. Fifty of these accounts with balances totaling $650,725 were
selected for confirmation. All but 10 of the confirmation requests have been returned; 24
were returned without any exceptions, 6 had minor differences that have been cleared
satisfactorily, and 10 confirmations had the following information and comments:
1. We are sorry, but we cannot answer your request for confirmation of our account
as the PDQ Company uses an accounts payable voucher system and can only
confirm individual invoices.
2. The balance of $1,050 was paid on December 28, 2012.
3. The balance of $7,750 was paid on January 5, 2013.
4. The balance of $2,975 was paid on December 13, 2012.
5. We do not owe you anything at December 31, 2012, as the goods, represented by
your invoice dated December 30, 2012, number 25050, in the amount of $11,550,
were received on January 5, 2013, on FOB destination terms.
6. An advance payment of $2,500 made by us in November 2012 should cover the two
invoices totaling $1,350 shown on the statement attached.
7. This confirmation was returned as undeliverable by the post office.
8. We are contesting the propriety of this $12,525 charge. We think the charge is
excessive.
9. We do not owe this balance as our agreement with the company allows us to return
any unsold goods without penalty. Amount okay. As the goods have been shipped
to us on consignment, we will remit payment upon selling the goods.
10. Your credit memo dated December 5, 2012, in the amount of $440 cancels the
balance above.
a. Indicate which of these confirmation responses likely represent timing differences.
b. Which of the ten confirmation responses likely represent a misstatement? Explain
why the response indicates a misstatement.
c. For each of the 10 confirmation responses, indicate the procedures you would
perform to determine whether the exception is a misstatement or has been
appropriately recorded by the client.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
