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Unformatted text preview: 16-4The following are balance-related audit objectives and related audit procedures for the audit of accounts receivable.BALANCE-RELATED AUDIT OBJECTIVEAUDIT PROCEDUREAccounts receivable in the aged trial balance agree with related master file amounts; the total is correctly added and agrees with the general ledger.Trace twenty accounts from the trial balance to the related accounts in the master file.Foot two pages of the trial balance, total all pages, and trace totals to the general ledger.The accounts receivable in the aged trial balance exist.Confirm accounts receivable using positive confirmations. Confirm all amounts over $15,000 and a nonstatistical sample of the remainder.Existing accounts receivable are included in the aged trial balance.Trace ten accounts from the accounts receivable master file to the aged trial balance.Accounts receivable in the trial balance are accurately recorded.Confirm accounts receivable using positive confirmations. Confirm all amounts over $15,000 and a nonstatistical sample of the remainder.Accounts receivable in the aged trial balance are properly classified.Review the receivables listed on the aged trial balance for notes and related party receivables.Transactions in the sales and collection cycle are recorded in the proper period.Select the last 10 sales transactions from the current year's sales journal and the first 10 from the subsequent year's and trace each one to the related shipping documents, checking for the date of actual shipment and the correct recording.Accounts receivable in the trial balance are owned.Review the minutes of the board of directors for any indication of pledged or factored accounts receivable. Accounts receivable in the trial balance are stated at realizable value.Discuss with the credit manager the likelihood of collecting older accounts. Examine subsequent cash receipts and the credit file on older accounts to evaluate whether receivables are collectible.16-5The most important objectives satisfied by confirmations are existence, rights, and accuracy. In extreme cases, confirmations are also useful tests for cutoff. Sometimes confirmations may also help the auditor satisfy the completeness objective.16-116-6A necessary audit procedure is to test the information on the client's trial balance for detail tie-in. The footing in the total column and the columns depicting the aging must be checked and the total on the trial balance reconciled to the general ledger to determine that all accounts are included in the listing.The master file records are the tie-in between tests of controls, substantive tests of transactions, and tests of details of balances. The aged trial balance is the listing of the master file. Since the auditor uses the aged trial balance in tests of details, he or she must be sure that information is the same as that tested in tests of controls and substantive tests of transactions. In addition, a sample of individual balances is traced to the master file to determine that the trial balance...
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This note was uploaded on 02/19/2011 for the course ACCT 509 taught by Professor Co during the Spring '11 term at Winthrop.
- Spring '11
- Trial Balance