Cross-foot the aging columns (7). Discuss with the credit manager the likelihood of collecting older accounts. Examine subsequent cash receipts and the credit file on all accounts over 90 days and evaluate whether the receivables are collectible (1 2). Evaluate whether the allowance is adequate after performing other audit procedures for collectibility of receivables (1 3). T h e client has rights to accounts receivable on the trial Review the minutes of the board of directors meetings for any indication of balance (rights). pledged or factored accounts receivable (5). Inquire of management whether any receivables are pledged or factored (5). Note : T h e procedures are summarized into a performance format in Table 16-5 on page 541. T h e numbers in parentheses after the procedures refer to Table 1 6-5. Apago PDF
TABLE 16-5 T est of Details of Balances Audit Program for Hillsburg Hardware Co. — Sales and Collection Cycle (Performance F ormat) 1. Review accounts receivable trial balance for large and unusual receivables. 2. Calculate analytical procedures indicated in carry-forward audit schedules (not included) and follow up on any significant changes from prior years. 3. Review the receivables listed on the aged trial balance for notes and related party receivables. 4. Inquire of management whether there are any related party, notes, or long-term receivables included in the trial balance. 5. Review the minutes of the board of directors meetings and inquire of management to determine whether any receivables are pledged or factored. 6. T race 10 accounts from the trial balance to the accounts receivable master file for aging and the balance. 7. F oot two pages of the trial balance for aging columns and balance and total all pages and cross- foot the aging. 8. Trace the balance to the general ledger . 9. Trace five accounts from the accounts receivable master file to the aged trial balance. 10. Confirm accounts receivable, using positive confirmations. Confirm all amounts over $100,000 and a nonstatistical sample of the remainder . 11. Perform alternative procedures for all confirmations not returned on the first or second request. 12. Discuss with the credit manager the likelihood of collecting older accounts. Examine subsequent cash receipts and the credit file on all larger accounts over 90 days and evaluate whether the receivables are collectible. 13. Evaluate whether the allowance is adequate after performing other audit procedures for collectibility of receivables. Apago PDF Enhancer 14. Select the last 20 sales transactions from the current year’s sales journal and the first 20 from the subsequent year’s and trace each to the related shipping documents, checking for the date of actual shipment and the correct recording. 15. Review large sales returns and allowances before and after the balance sheet date to determine whether they are recorded in the correct period.
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