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9 Cards in this Set

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Alternative procedures

Procedures used to obtain evidence about the existence and valuation of accounts receivable when a positive confirmation is not returned, including examining cash collected after the confirmation date and vouching unpaid invoices to customer's orders, sales orders, shipping documents, and sales invoices.

Billing of lading

A shipping document that describes items being shipped, the shipping terms, and delivery address; a formal legal document that conveys responsibility for the safety and shipment of items to the shipper.


Differences between a customer's records and the client's records reported on positive or negative confirmations.


A technique used to cover up the embezzlement of cash whereby a cash collection from one customer is stolen by an employee who takes another customer's payment and credits the first customer. This process continues, and at any point in time at least one customer's account is overstated.

Negative confirmation

A request to customers asking them to respond directly to the auditor only if the disagree with the indicated balance.

Positive confirmation

A request to customers asking them to respond directly to the auditor if they agree or disagree with the indicated balance.

Revenue Cycle

The process of receiving a customer's order, approving credit for a sale, determining whether the goods are available for shipment, shipping the goods, billing the customers, collecting cash, and recognizing the effect of this process on other related accounts.

Side letter

An agreement containing contract terms that are not part of the formal contract (often involving rights of return). Side letters increase audit risk because they enable key contract terms affecting revenue recognition to be hidden from the auditor as part of a revenue recognition fraud.

Timing difference

Confirmation exceptions caused by transactions that are in process at the confirmation date, such as in-transit shipments or payments. These are not misstatements.