10. Study the accounting manual on date of shipment and make inquiry about accountants’ instructions to date sales. 12. Obtain client’s documentation showing the accounts receivable subsidiary total reconciled to the accounts receivable control account. Alternatively, total the subsidiary and compare the amount to the control account.
13. Obtain client’s documentation showing reconciliation of intercompany receivables and payables for sales and purchases. Alternatively, confirm balances with subsidiaries or other auditors.
14. Select a sample of credit files and trace to customers’ accounts receivable, noting extent of update for payment history.
15. Study client correspondence on investigation and collection efforts on overdue
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b. These factors will affect the reliability of confirmations:
(1) The confirmation form. Some positive forms request agreement or disagreement with information stated on the form. Other positive forms, known as blank forms, request the respondent to fill in the balance or furnish other information. Negative forms request a response only if the recipient disagrees with the information stated on the request.
(2) The auditor’s prior experience with this client or similar clients is also likely to affect reliability because the auditor will have prior knowledge of the expected confirmation response rates, inaccurate information on prior years’ confirmations, and misstatements identified during prior audits.
(3)The nature of the information being confirmed may affect the competence of the evidence obtained as well as the response rate. For example, this client’s customers’ accounting systems may permit confirmation of individual transactions, but not account balances, or vice versa.
(4)Sending the confirmation requests to the proper respondents will likely provide meaningful and competent evidence. Each request should be sent to a person the auditor believes is knowledgeable about the information to be confirmed. c. The nature of the alternative procedures the auditor can apply when replies to positive confirmation requests are
d) Authencity:- There should be no doubt that the evidence is genuine and has been produced by the learner. e)Currency:- The evidence can prove that the learner is up to date on current methods, skills and knowledge in the chosen vocational area.
To judge whether evidence is sufficient, authentic and current it is important as an assessor to attend standardisation meetings and to keep up to date with the regulations of the relevant awarding body. If in doubt it is important to double heck.
* Documents used: customer order, sales order, shipping document, sales invoice, sales journal, remittance advice, bank deposit list, cash receipts jornal, credit memo, sales return and allowance journal, uncollectable account authorization form, a/r master file, a/r trail balance, monthly statement
According to an article in the CPA Journal, the accounting profession has long contended that an audit conducted in accordance with generally accepted auditing standards (GAAS) provides reasonable assurance that there are no material misstatements contained within financial statements. Suggest at least two (2) alternative methods that auditors can use to provide a more concrete level of assurance to investors. Provide support for your responses with examples of such methods in use.
Sales invoices are prepared in batches on a daily basis using numbered sales invoices. Sales invoice numbers are automatically generated by the company’s computer system. The accounts receivable clerk does not have appropriate computer rights to override the computer-generated invoice number. Upon preparing sales invoices, the accounts receivable clerk verifies that the first invoice number of the batch is consistent with the last invoice number of the previous batch. Inconsistencies or skipped sales invoice numbers are investigated and resolved before new sales invoices are prepared. The items shipped are compared to the items billed for proper quantity, price, and other sales order terms.
h. This is important so that the company can continue in such a way as to be judicially prudent. They must know what is the acceptable method of getting evidence to keep it safe for court admission. There may also be extenuating circumstances that must be taken into account depending on the organization and the event.
This links to the G.L. control account which in the purchasing cycle is accounts payable. However, the system allows a company to set up multiple reconciliation accounts. For example, a company may want to separate the vendors by geographic region. This is easily done by having different AP control controls for different geographic regions.
reliable evidence, the confirmation process is subject to the risk of interception and alteration of
The entries used to record the disposition when the receivables are sold to a factor often detail the cash received plus the service charge. The company can then balance their receivables account. When a credit card company records a credit card
- Be prepared at the time the client counts their inventory for determining year-end balances
Question 3: Describe and show the journal entries illustrating how the company accounts for the transfer of its accounts receivable to financial institutions. Is this accounting treatment reasonable? What are the key assumptions made under this approach? Do you agree with these assumptions?
This case analysis commences by explaining the type of accounting officer needed to execute the job functions for the client, Big Spenders Inc. The next objective will be to examine the income statements of the two prospective business entities that the client intends to choose from concerning investment – in order to diversify its portfolio. The strategies that will be explored in terms of the analysis of the income statements includes the computation of (i) operation profit margin, (ii) gross margin, (iii) net profit margin, and (iv) return on equity – for both companies of interest. The results of examinations will put the accountant in a position to make sounds recommendation to his superior at BUSI 1043 LLP, so that Big Spenders Inc. can be properly guided.
The interview with Colin Smith, from Office Products Depot, meant I was able to identify the accounts receivable subsystem they used and their accounts receivable management. I focussed on their policies for the offering and checking of credit, managing credit levels, charging the credit customers, receiving payment from credit customers and the general management of credit customers. I will be using the information from the interview with Colin as well as information from fictitious accounts receivable to explain their policies.
The total Accounts Receivable balance in the records of $4,752,257.70 was verified by setting a filter of
1. The requirements related to developing an expectation and conducting analytical procedures when those procedures are intended to provide substantive evidence is provided by the reorganized Audit Standard 2305 Substantive Analytical Procedures effective December 31, 2016 in the following list: