Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Textbook Question
Chapter 16, Problem 27DQP
The following misstatements are sometimes found in the sales and collection cycle’s account balances:
- 1. Several cash receipts were posted to the incorrect customer accounts.
- 2. A shipment made in the subsequent period is recorded as a current period sale.
- 3. The allowance for uncollectible accounts is inadequate because of the client’s failure to reflect depressed economic conditions in the allowance.
- 4. Several
accounts receivable are in dispute as a result of claims of defective merchandise. - 5. The pledging of accounts receivable to the bank for a loan is not disclosed in the financial statements.
- 6. Goods were returned for credit on the last day of the fiscal year but the sales return was not recorded until the following fiscal year.
- 7. Several accounts receivable in the accounts receivable master file are not included in the aged
trial balance . - 8. One account receivable in the accounts receivable master file is included on the aged trial balance twice.
- 9. Long-term interest-bearing notes receivable from affiliated companies are included in accounts receivable.
- a. For each misstatement, identify the balance-related audit objective to which it pertains.
- b. For each misstatement, list an internal control that should prevent it.
- c. For each misstatement, list one test of details of balances
audit procedure that the auditor can use to detect it.
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The following misstatements are sometimes found in the salesand collection cycle’s account balances:1. Several cash receipts were posted to the incorrect customer accounts.2. Several accounts receivable in the accounts receivable master file are not includedin the aged trial balance.3. One account receivable in the accounts receivable master file is included on theaged trial balance twice.4. A shipment made in the subsequent period is recorded as a current period sale.5. The allowance for uncollectible accounts is inadequate because of the client’sfailure to reflect depressed economic conditions in the allowance.6. Several accounts receivable are in dispute as a result of claims of defective merchandise.7. The pledging of accounts receivable to the bank for a loan is not disclosed in thefinancial statements.8. Goods were returned for credit on the last day of the fiscal year but the sales returnwas not recorded until the following fiscal year.9. Long-term interest-bearing notes…
The Allowance for Doubtful Accounts represents:
a. The amount of uncollected accounts written off to date
b. Bad debt losses incurred in the current period
c. The difference between the recorded value of accounts receivable and the net realizable value of accounts receivable
d. The difference between total sales made on credit and the amount collected from those credit sales
Indicate whether each statement best describes the allowance method or the direct write-off method.
List
1. When an account is written off, debit Allowance for Doubtful Accounts.
2. Usually does not best match sales and expenses because Bad Debts Expense is not recorded until an account
becomes uncollectible, which usually occurs in a period after the credit sale.
3. Bad Debts Expense is recorded in the period in which the related sales occur.
4. Bad Debts Expense is recorded when an account is determined to be uncollectible.
5. An adjusting entry is generally required at the end of each period to estimate bad debts.
6. The write-off of a specific customer account directly affects net income in that period.
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Chapter 16 Solutions
Auditing And Assurance Services
Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Explain why you agree or disagree with the...Ch. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 10RQ
Ch. 16 - Prob. 11RQCh. 16 - Under what circumstances is it acceptable to...Ch. 16 - Prob. 13RQCh. 16 - Prob. 14RQCh. 16 - Prob. 15RQCh. 16 - Prob. 16RQCh. 16 - Prob. 17RQCh. 16 - Prob. 18RQCh. 16 - Prob. 19RQCh. 16 - Prob. 20.1MCQCh. 16 - Prob. 20.2MCQCh. 16 - Prob. 20.3MCQCh. 16 - The following questions deal with confirmation of...Ch. 16 - Prob. 21.2MCQCh. 16 - Prob. 21.3MCQCh. 16 - Prob. 22.1MCQCh. 16 - Prob. 22.2MCQCh. 16 - Prob. 22.3MCQCh. 16 - Prob. 23.1MCQCh. 16 - Which of the following is least likely to be a...Ch. 16 - The following questions concern auditor...Ch. 16 - Prob. 24DQPCh. 16 - Prob. 25DQPCh. 16 - Prob. 26DQPCh. 16 - The following misstatements are sometimes found in...Ch. 16 - Prob. 28DQPCh. 16 - Prob. 29DQPCh. 16 - Prob. 30DQPCh. 16 - Prob. 31DQPCh. 16 - Prob. 32DQPCh. 16 - Prob. 33DQPCh. 16 - Prob. 34DQPCh. 16 - Prob. 35DQPCh. 16 - Prob. 36DQPCh. 16 - Prob. 38DQPCh. 16 - Prob. 39ICA
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