Accounts Receivable Confirmations - In example 1, the...

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Accounts Receivable Confirmations The auditor’s assessment of control risk for Total Computer’s controls over accounts receivable was based on the confirmation procedures performed for example 1-6 and the alternative procedures performed for examples 5 and 6. Additional audit work is necessary in example 5 in order to explain the discrepancy. The Audit Senior has to communicate with Betty, Total Computer’s Controller, and verify with the customer about the returned items. In example 6, the confirmation mailed to the customer was not returned, thus additional audit work is necessary. The audit engagement team has to examine the cash receipts and the contract, and the Audit Manager has to communicate with Total Computer’s Sales Manager. Therefore, the assessed lever of the control risk for the audit of accounts receivable must have been increased since auditor need more effort in examples 5 and 6 in this case, the auditor’s decision would likely be to assess control risk at maximum for assertions related to controls over accounts receivable.
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Unformatted text preview: In example 1, the positive confirmation was returned by fax rather than mail. Since fax is not as competent as the original confirmation by mail, the auditor should call Suzie Smith of to confirm what the fax reveals and to request the original confirmation by mail. In example 2, the confirmation was returned via email. The evidence provided is incompetent because the chance for the client in tampering with the confirmation increases since there is no signature to prove that the confirmation email is from the customer but not the client. So the auditor should call to return the original confirmation by mail. In example 3, the confirmation was returned but neither A nor B was checked. Terry Mac Arthur from noted down that he had discussed with the Total Computers controller and the balance appeared reasonable. In example 4, the confirmation was returned and A was checked. The evidence provided is...
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This note was uploaded on 11/30/2011 for the course ACCOUNTING 655 taught by Professor Lee during the Spring '11 term at Prince George's Community College, Largo.

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