审计学一种整合方法阿伦斯英文版第12版课后答案解析Chapter16SolutionsManual.docx

1、审计学一种整合方法阿伦斯英文版第12版课后答案解析Chapter16SolutionsManualChapter 16Completing the Tests in theSales and Collection Cycle:Accounts Receivable Review Questions16-1 Tests of details of balances are designed to determine the reasonableness of the balances in sales, accounts receivable, and other account balance

2、s that are affected by the sales and collection cycle. Such tests include confirmation of accounts receivable, and examining documents supporting the balance in these accounts. Tests of controls and substantive tests of transactions for the sales and collection cycle are intended to determine the ef

3、fectiveness of internal controls and to test the substance of the transactions that are produced by this cycle. Such tests consist of activities such as examining sales invoices in support of entries in the sales journal, reconciling cash receipts, or reviewing the approval of credit. The results of

4、 the tests of controls and substantive tests of transactions affect the procedures, sample size, timing and items selected for the tests of details of balances (i.e., effective internal controls will result in reduced testing when compared to the tests of details required in the case of inadequate i

5、nternal controls). The results of tests of controls also affect the public company auditors report on internal controls over financial reporting.16-2 SAS 67 (AU 330.20) discusses the use of negative accounts receivable confirmations as follows:The negative form requests the recipient to respond only

6、 if he or she disagrees with the information stated on the request. Negative confirmation requests may be used to reduce audit risk to an acceptable level when (a) the combined assessed level of inherent and control risk is low, (b) a large number of small balances is involved, and (c) the auditor h

7、as no reason to believe that the recipients of the requests are unlikely to give them consideration. For example, in the examination of demand deposit accounts in a financial institution, it may be appropriate for an auditor to include negative confirmation requests with the customers regular statem

8、ents when the combined assessed level of inherent and control risk is low and the auditor has no reason to believe that the recipients will not consider the requests. The auditor should consider performing other substantive procedures to supplement the use of negative confirmations.16-2 (continued)

9、The preceding requirement that negative confirmations are considered appropriate where the internal controls of the sales and collection cycle are effective is violated by Cynthia Roberts approach. Not only is her approach questionable from the standpoint that nonresponses have not necessarily prove

10、d the existence of the receivable, but her confirmation at an interim date requires her to assume an assessed control risk less than maximum, but she has not tested the related internal controls to justify this assumption.16-3 The following are analytical procedures for the sales and collection cycl

11、e, and potential misstatements uncovered by each test. Each ratio should be compared to previous years.ANALYTICAL PROCEDUREPOTENTIAL MISSTATEMENT1. Gross margin by product lineSales cutoff errors or other misstatements involving sales; purchase cutoff errors or other misstatements involving inventor

12、y or purchases. 2. Sales returns and allowances as a percentage of gross sales by product line or segmentAll returns were not recorded, or shipments to customers were not in accordance with specifications and were returned (this could result in significant operating problems).3. Trade discounts take

13、n as a percentage of net salesDiscounts that were taken by customers and allowed by the company were not recorded.4. Bad debts as a percentage of gross salesMisstatement in determining the allowance for uncollectible accounts.5. Days sales in receivables outstandingA problem with collections, an und

14、erstatement of bad debts and allowance for uncollectible accounts.6. Aging categories as a percentage of accounts receivablesCollection problems and understatement of allowance for uncollectible accounts.7. Allowance for uncollectible accounts as a percentage of accounts receivableMisstatement in de

15、termining the allowance for uncollectible accounts.8. Comparison of the balances in individual customers accounts over a stated amount with their balances in the previous yearA problem with collections and therefore a misstatement of the allowance for uncollectible accounts, or cutoff errors or othe

16、r misstatements in customer accounts. 16-4 The following are balance-related audit objectives and related audit procedures for the audit of accounts receivable.BALANCE-RELATED AUDIT OBJECTIVEAUDIT PROCEDUREAccounts receivable in the aged trial balance agree with related master file amounts; the tota

17、l is correctly added and agrees with the general ledger. Trace twenty accounts from the trial balance to the related accounts in the master file. Foot two pages of the trial balance, total all pages, and trace totals to the general ledger.The accounts receivable in the aged trial balance exist.Confi

18、rm accounts receivable using positive confirmations. Confirm all amounts over $15,000 and a nonstatistical sample of the remainder.Existing accounts receivable are included in the aged trial balance.Trace ten accounts from the accounts receivable master file to the aged trial balance.Accounts receiv

19、able in the trial balance are accurately recorded.Confirm accounts receivable using positive confirmations. Confirm all amounts over $15,000 and a nonstatistical sample of the remainder.Accounts receivable in the aged trial balance are properly classified.Review the receivables listed on the aged tr

20、ial balance for notes and related party receivables.Transactions in the sales and collection cycle are recorded in the proper period.Select the last 10 sales transactions from the current years sales journal and the first 10 from the subsequent years and trace each one to the related shipping docume

21、nts, checking for the date of actual shipment and the correct recording.Accounts receivable in the trial balance are owned.Review the minutes of the board of directors for any indication of pledged or factored accounts receivable. Accounts receivable in the trial balance are stated at realizable val

22、ue.Discuss with the credit manager the likelihood of collecting older accounts. Examine subsequent cash receipts and the credit file on older accounts to evaluate whether receivables are collectible.16-5 The most important objectives satisfied by confirmations are existence, rights, and accuracy. In

23、 extreme cases, confirmations are also useful tests for cutoff. Sometimes confirmations may also help the auditor satisfy the completeness objective.16-6 A necessary audit procedure is to test the information on the clients trial balance for detail tie-in. The footing in the total column and the col

24、umns depicting the aging must be checked and the total on the trial balance reconciled to the general ledger to determine that all accounts are included in the listing. The master file records are the tie-in between tests of controls, substantive tests of transactions, and tests of details of balanc

25、es. The aged trial balance is the listing of the master file. Since the auditor uses the aged trial balance in tests of details, he or she must be sure that information is the same as that tested in tests of controls and substantive tests of transactions. In addition, a sample of individual balances

26、 is traced to the master file to determine that the trial balance has been properly summarized from the master file. In most cases, it will not be necessary to trace each amount to the master file unless a significant number of misstatements is noted and it is determined that reliance cannot be plac

27、e upon the trial balance with less than 100% testing. Normally a sample of entries on the trial balance could be traced to the master file and would be sufficient to draw a conclusion as to the overall accuracy of the trial balance.16-7 The purpose of the accuracy tests of gross accounts receivable

28、is to determine the correctness of the total amounts receivable from customers. These tests normally consist of confirmation of accounts receivable or examination of shipping documents in support of the shipment of goods to customers. The purpose of the test of the realizable value of receivables is

29、 to estimate the amount of the accounts receivable balance that will not be collected. To estimate this amount, the auditor normally reviews the aging of the accounts receivable, analyzes subsequent cash payments by customers, discusses the collectibility of individual accounts with client personnel

30、, and examines correspondence and financial statements of significant customers.16-8 In most audits it is more important to carefully test the cutoff for sales than for cash receipts because sales cutoff misstatements are more likely to affect net earnings than are cash receipt cutoff misstatements.

31、 Cash receipt cutoff misstatements generally lead to a misclassification of accounts receivable and cash and, therefore, do not affect income. To perform a cutoff test for sales, the auditor should obtain the number of the last shipping document issued before year-end and examine shipping documents

32、representing shipments before and after year-end and the related sales invoices to determine that the shipments were recorded as sales in the appropriate period. The propriety of the cash receipts cutoff is determined through tests of the year-end bank reconciliation. Deposits in transit at year-end should be traced to the subsequent bank statement. Any delays in crediting deposits by the bank should be investigated to determine whether the cash receipts books were held open.16-9 The value of accounts receivable confirmation as evidence ca