Ch16 Solutions - Chapter 16 Completing the Tests in the...

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Chapter 16 - Completing the Tests in the Sales and Collection Cycle: Accounts Receivable Multiple Choice Questions From CPA Examinations 16-20 a. (4) b. (4) c. (2) 16-21 a. (2) b. (4) c. (2) d. (2) 16-22 a. (2) b. (1) Discussion Questions and Problems 16-23 1. Detail tie-in 2. Detail tie-in 3. a.Existence b. Accuracy c. Realizable value (if cash receipts relate to older accounts) 4. a. Existence b. Accuracy 5. a. Existence b. Accuracy c. Realizable value (if cash receipts relate to older accounts) 6. Cutoff 7. a.Rights b.Presentation and disclosure 8. Classification 1
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16-24 a. BALANCE- RELATED AUDIT OBJECTIVE b. PREVENTIVE INTERNAL CONTROL c. TESTS OF DETAILS OF BALANCES AUDIT PROCEDURES 1. Transactions are recorded in the proper period (cutoff). Company policy should state that the cash cutoff at end of a month should be achieved by only recording the amounts received prior to month- end in the current month. The auditor should compare the deposits in transit shown on the bank reconciliation to the date that deposits reached the bank to determine that the time lag is reasonable. The auditor can also be present at the client's facility at the end of the last working day of the year, obtain the amount of the last deposit to be made from current year receipts, and should determine that this was, indeed, the last deposit recorded during the current year. 2. Accounts receivable are stated at realizable value (realizable value) The client should perform an analysis of the collectibility of accounts receivable at the end of the year and should communicate with its customers to determine the likelihood of the collectibility of individual accounts. The auditor should keep informed of current economic conditions and consider their effect on collectibility of accounts receivable for the client. The auditor may compare cash receipts after year-end to the cash receipts of the similar period of the previous year and consider any changes as to their effect on the collectibility of the accounts receivable. 3. Accounts receivable are stated at the correct amounts (accuracy). The client should record claims for defective merchandise as soon as possible after the claim is received to keep accounts receivable balances as accurate as possible. The auditor should note any replies to the
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Ch16 Solutions - Chapter 16 Completing the Tests in the...

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