reduce the number of items tested on a substantive basis. True False 25. Confirmations of bank accounts may help the auditor to determine if material amounts of accounts receivable have been pledged or discounted. True False 26. When the auditor seeks evidence concerning the allowance for doubtful accounts he or she would most likely use an aged trial balance to help identify past due balances. True False 27. Current auditing standards do not require the confirmation of receivables if accounts receivable are not material. True False 28. Accounts receivable confirmation letters should be prepared on the auditing firm's letterhead. True False 29. Alternative procedures to the confirmation of receivables include review of subsequent collections and examination of supporting evidence. True False 30. Lapping of accounts receivable is least likely to occur when there is an inadequate segregation of duties. True False 31. Positive accounts receivable confirmations should be used on all... Show
November 27, 2022/ Steven Bragg
If your company is subject to an annual audit, the
auditors will review its accounts receivable in some detail. Accounts receivable is frequently the largest asset that a company has, so auditors tend to spend a considerable amount of time gaining assurance that the amount of the stated
asset is reasonable. Here are some of the accounts receivable audit procedures that they may follow:
Accounts Receivable Audit RisksThe preceding list of audit procedures is designed to detect a variety of audit risks, which include the following:
What is the main risk associated with accounts receivable?Accounts receivable risks include slowing the cash flow – or working capital – that sustains your business and allows you to grow. Effective accounts receivable risk management lowers your exposure by ensuring that invoice balances are paid on or before the invoice due date.
What are the cost and risk associated with receivables?There are five major costs associated with accounts receivable. They are: bad debts, interest cost, opportunity costs, administrative costs, and miscellaneous costs.
What is related to accounts receivable?Accounts receivable refer to the money a company's customers owe for goods or services they have received but not yet paid for. Accounts payable, on the other hand, refer to the money a company owes its suppliers for goods and services that have been provided and for which the supplier has submitted an invoice.
What is the major category for accounts receivable?You can find your accounts receivable balance under the 'current assets' section on your balance sheet or general ledger. Accounts receivable are classified as an asset because they provide value to your company.
|