14-30 (Substantive tests of accounts receivable) The following situations were not discovered by an inexperienced staff auditor in the audit of the Parson Company.

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Brendan Brewer

Business

28 May, 01:55

14-30 (Substantive tests of accounts receivable) The following situations were not discovered by an inexperienced staff auditor in the audit of the Parson Company.

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Allan Hayden · Answer 1

1. Several accounts were incorrectly aged in the

client's aging schedule.

Procedures: Compare age% to prior year AR - Analytical procedures.

Assertion: cutoff, Valuation and allocation.

2. The accounts receivable turnover ratio was far below

expected results.

Procedure: AR analytical test: AR/AP, AR turnover, etc.-Analytical procedures.

Assertion:Completeness, cutoff.

3. Goods billed were not shipped.

Procedure: Cutoff test of billing-test the last month invoices. Vouching to the shipping doc.-Inspection of records.

Assertion: Occurrence, cutoff.

4. Some year-end sales were recorded in the wrong

accounting period.

Procedure: cut off test of billing-test invoices billed subsequent to year end.-Inspection of records

assertion:Completeness, cutoff

5. Several sales were posted for the correct amount but to

the wrong customers in the accounts receivable ledger.

Procedure: Confirmation of billings-Confirmation

Assertion: Occurrence.

6. The allowance for uncollectable accounts was

understated.

Procedures: Test the ratio of allowance to old AR and compare to PY.

-Analytical procedures.

Assertion:Valuation and allocation

7. Several sales were entered and posted at incorrect

amounts.

Procedures: Confirmation of AR. - Confirmation

Assertion: Accuracy and valuation

8. Mathematical errors were made in totaling the accounts

receivable ledger.

Procedures: Foot AR aging.-Recalculation

Assertion: Accuracy and valuation

9. An unrecorded sale at the balance sheet date was

collected in the next month.

Procedure: Post subsequent cash to AR balance at YE. Reperformance. records.

Assertion: Completeness, cutoff.

10. Several fictitious sales were recorded.

Procedure: Confirm customer balance.-Confirmation.

assertion: Occrrence.

11. The pledging of some customer accounts as security for

a loan was not reported in the balance sheet.

Procedure: Review security agreements.-Inspection of record.

Assertion: Occurrence and rights and obligations.

12. Some year-end cash receipts were recorded in the wrong

accounting period.

Procedure: cash cutoff testing.-Inspectionof record.

Assertion: cutoff, occurrence, completeness.