Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

Last Updated on January 31, 2022 by Admin 3

Which of the following procedures would an auditor most likely perform for year-end accounts receivable confirmations when the auditor did not receive replies to second requests?

  • Review the cash receipts journal for the month prior to the year-end.
  • Intensify the study of the internal control structure concerning the revenue cycle.
  • Increase the assessed level of detection risk for the existence assertion.
  • Inspect the shipping records documenting the merchandise sold to the debtors. 
Explanation:
Choice “D” is correct. When an auditor does not receive replies to second requests on year-end accounts receivable confirmations, the auditor would most likely perform alternate procedures to support the existence of the receivables. These procedures include inspection of the shipping records to determine that the merchandise was actually sold to the debtors.
Choice “A” is incorrect. Alternate procedures would also include reviewing the cash receipts journal for the months subsequent to year-end. Reviewing the cash receipts journal for the month prior to year-end would provide no evidence regarding the existence of a year-end receivable, which obviously had not been paid by year-end.
Choice “B” is incorrect. Intensifying the study of the internal control structure concerning the revenue cycle would provide no additional evidence related to the specific accounts receivable confirmations that were not returned.
Choice “C” is incorrect. Increasing the assessed level of detection risk for the existence assertion would provide no additional evidence related to the specific accounts receivable confirmations that were not returned by the customer. (By sending out confirmations, the auditor is already performing substantive tests).
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