3 This is a confirmation of the balance with an additional comment about a

3 this is a confirmation of the balance with an

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3.This is a confirmation of the balance with an additional commentabout a subsequent payment. Since the customer has given us thedata, it is preferable to check to see that the information agreeswith the company's records.4.(a) The cause should be investigated thoroughly. If the cash receiptwas posted to the wrong account, it may indicate merely aclerical error. On the other hand, posting to the wrong accountmay indicate lapping.(b)Such a comment may also indicate a delay in posting anddepositing of receipts. If this is the case, the company shouldbe informed immediately so that it can take corrective steps.5.This appears to represent a shipment in transit. The auditor shouldevaluate the shipping document and evaluate whether in thecircumstances it is reasonable that the customer received thegoods on January 5th.6.(a) Determine if such advance payment has been received andthat it has been properly recorded. A review should be madeof other advance payments to ascertain that charges againstsuch advances have been properly handled.(b)If the advance payment was to cover these invoices, theauditor should propose a reclassification of the $1,350,debiting the advance payment account and creditingaccounts receivable–trade.7.(a) The auditor should be alert to the possibility of a fictitioussale or receivable. The auditor should verify the address ofthe company to determine if the confirmation was sent to thecorrect address. It is possible the company has moved, or isno longer in business. If the address used was incorrect, arevised confirmation should be sent.(b)Examine the shipping order for indications that the goodswere shipped and, if available, carrier's invoice and/or bill oflading for receipt of the goods.8.This should be discussed with the appropriate officials andcorrespondence with the customer should be reviewed to allowdetermination whether an adjustment should be made in the amount
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16-22receivable or if an allowance for uncollectible accounts should beset up.9.As title on any goods shipped on consignment does not pass untilthose goods are sold, the sales entry should be reversed, theinventory reduction reversed, and cost of sales credited if it isactually aconsignment sale. Other so-called sales should bereviewed and
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16-31 (continued)company officials queried to determine if other sales actuallyrepresent consignment shipments; if so, a similar adjustmentshould be made
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