The review of subsequent cash receipts has revealed that several of the trade receivables that were considered doubtful have now been paid. However, the audit procedures have shown that a large debtor that was considered safe at 30 June was unexpectedly declared bankrupt on 20 July

The review of subsequent cash receipts has revealed that several of the trade receivables that were considered doubtful have now been paid. However, the audit procedures have shown that a large debtor that was considered safe at 30 June was unexpectedly declared bankrupt on 20 July

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter2: Audits Of High-risk Accounts

Section2.6: Cbi Holding Company, Inc.

Problem 2Q

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Definition Definition Methods and techniques used by the auditor to gather the appropriate evidence so that a true and fair judgment can be made on the quality of the financial statements of the client. Audit procedures are developed after determining audit objectives, scope, approach, and risk assessment.

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The review of subsequent cash receipts has revealed that several of the trade receivables thatwere considered doubtful have now been paid. However, the audit procedures have shownthat a large debtor that was considered safe at 30 June was unexpectedly declared bankrupton 20 July. The year-end for the company is 30 June and the audit report is due to be signed on 20 August.Required:For each of the items above, explain what type of subsequent event it is and the appropriatetreatment of the item in the financial report.
Which of the following responses to an accounts receivable confirmation at December 31 would cause an audit team the most concern?a. “This amount was paid on December 30.”b. “We received this shipment on January 2.” c. “These goods were returned for credit on November 15.”d. “The balance does not reflect our sales discount for paying by January 5.”
Which of the following procedures will an auditor most likely perform for year-endaccounts receivable confirmations when the auditor did not receive replies to secondrequests?(1) Review the cash receipts journal for the month prior to year end.(2) Intensify the study of internal control concerning the revenue cycle.(3) Inspect the shipping records documenting the merchandise sold to the debtors.(4) Increase the assessed level of detection risk for the existence assertion.
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