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10 Cards in this Set
- Front
- Back
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What must auditors satisfy in designing tests of details of balances for accounts receivable?
What are they called when applied to accounts receivable? |
Each of the eight balance-related audit objectives which are the same for all accounts. Specifically applied to accounts receivable they are called accounts receivable balance-related audit objectives.
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What are the 8 accounts receivable balance-related audit objectives?
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1. A/R in aged trial balance agree with related master file amounts, and the total is correctly added and agrees with the general ledger. (DETAIL TIE-IN)
2. Recorded A/R Exist. (EXISTENCE) 3. Existing A/R are included. (COMPLETENESS) 4. A/R are accurate. (ACCURACY) 5. A/R are correctly classified. (CLASSIFICATION) 6. Cutoff for A/R is correct. (CUTOFF) 7. A/R is stated at realizable value. (REALIZABLE VALUE) 8. The client has rights to A/R. (RIGHTS) |
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What is the term for allocating the preliminary judgment amount to each significant balance sheet account, including A/R?
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Setting tolerable misstatement.
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Auditors assess inherent risk for ?
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Each objective for an account such as accounts receivable, considering client business risk and the nature of the client and industry.
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SAS 99 Indicates ?
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Auditors must normally identify a specific fraud risk for revenue recognition.
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SAS 99 likely affects the auditor's assessment of inherent risk for what objectives?
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Existence, Sales cutoff, and Sales returns and allowances cutoff.
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What is a common way for clients to misstate cutoff?
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Error or through fraud.
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Why is it common for clients to unintentionally or fraudulently misstate the allowance for uncollectible acccounts (realizable value)?
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Because of the difficulty of the judgements to determine the correct balance.
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Auditors are especially concerned with what three aspects of internal controls?
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1. Controls that prevent or detect embezzlements.
2. Controls over cutoff. 3. controls related to the allowance for uncollectible accounts. |
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What does an aged trial balance do?
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It lists the balances in the accounts receivable master file at the balance sheet date, including individual customer balances outstanding and a breakdown or each balance by the time passed between the date of sale and the balance sheet date.
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