Auditing of Receivables Auditing of receivables and revenues has a number of objectives as explained in our textbook, among them is confirming that the receivables are valid and transactions are complete, establishing valuation and transactions ' accuracy, as well as verifying that the client has rights to the receivables. For the auditor to audit these particular areas, an understanding of the company 's environment and the management 's style is important as well as the ability to comprehend the company 's internal controls. This would enhance the auditor 's appreciation for inherent risks and the possibility of fraud perception from the handling of receivables.
Audit 's Objectives The auditor 's objectives regarding receivables are important …show more content…
UA 's controller is aware of the refund issue, and does not seem concern that they are keeping money that belongs to customers that cancelled services and have the right to their refund. Is important for the auditor to understand the company 's environment; in this case, the specifics signal that that management is taking a risk in order to increase the company 's profits, and that the controller is part of the scheme. This is a serious ethical issue that should not had past the company 's internal control, or in this case, the controller. Internal controls are implemented to avoid and address issues of this type, where possible situations may result in the company experiencing risk that compromise them either by management mistakes or fraud (Whittington & Pany, …show more content…
Once making this determination, the auditor can proceed; assuming that the assumption is correct and the client does not have rights to that money, he should take necessary steps to deal with the issue. The auditor needs to figure out the amount of receivables that are being affected by this issue and its results on receivables valuation; he should then report the issue to the UA 's audit committee with a clear picture of its effects in the financial statements. Misstatements are usually attributed to management, and they can occur by intentional fraud or mistakes. The auditor would state this in the audit. AICPA regulations require that the audit is free of these misstatements and knowledge that although the best effort can be made, the auditor may miss some of these financial statements irregularities on their audit. However, in the case of UA, the auditor 's awareness that such misstatements had occurred under the controllers supervision may produce a modified or adverse opinion according to regulations stated on AU-C Section 705 (.02b) (AICPA,
Audit 's Objectives The auditor 's objectives regarding receivables are important …show more content…
UA 's controller is aware of the refund issue, and does not seem concern that they are keeping money that belongs to customers that cancelled services and have the right to their refund. Is important for the auditor to understand the company 's environment; in this case, the specifics signal that that management is taking a risk in order to increase the company 's profits, and that the controller is part of the scheme. This is a serious ethical issue that should not had past the company 's internal control, or in this case, the controller. Internal controls are implemented to avoid and address issues of this type, where possible situations may result in the company experiencing risk that compromise them either by management mistakes or fraud (Whittington & Pany, …show more content…
Once making this determination, the auditor can proceed; assuming that the assumption is correct and the client does not have rights to that money, he should take necessary steps to deal with the issue. The auditor needs to figure out the amount of receivables that are being affected by this issue and its results on receivables valuation; he should then report the issue to the UA 's audit committee with a clear picture of its effects in the financial statements. Misstatements are usually attributed to management, and they can occur by intentional fraud or mistakes. The auditor would state this in the audit. AICPA regulations require that the audit is free of these misstatements and knowledge that although the best effort can be made, the auditor may miss some of these financial statements irregularities on their audit. However, in the case of UA, the auditor 's awareness that such misstatements had occurred under the controllers supervision may produce a modified or adverse opinion according to regulations stated on AU-C Section 705 (.02b) (AICPA,