Question: 11 1 Explain the difference between a customer s order and a

11–1. Explain the difference between a customer’s order and a sales order, as these terms might be used by a manufacturing company making sales on credit.

11–2. Explain why the audit of revenue and receivables may present the auditors with significant
audit risk.

11–3. An inexperienced clerk assigned to the preparation of sales invoices in a manufacturing company became confused as to the nature of certain articles being shipped, with the result that the prices used on the invoices were far less than called for in the company’s price lists. What controls could be established to guard against such errors?

11–6. The controller of a new client operating a medium-size manufacturing business complains to you that he believes the company has sustained significant losses on several occasions because certain sales invoices were misplaced and never recorded as accounts receivable. What control can you suggest to guard against such problems?

11–7. Comment on the following: “Any voided prenumbered shipping documents should be properly canceled and disposed of to eliminate any possibility of improper shipment of goods.”

11–9. Among specific procedures that contribute to good internal control over the business processes related to accounts receivable are ( a ) the approval of uncollectible account write-offs and credit memoranda by an executive and ( b ) the sending of monthly statements to all customers.
State three other procedures conducive to strong internal control.

11–11. Your review of notes receivable from officers, directors, stockholders, and affiliated companies discloses that several notes of small amounts were written off to the allowance for uncollectible notes during the year. Have these transactions any special significance? Explain.

11–12. What auditing procedures, if any, are necessary for notes receivable but not required for accounts receivable?

11–14. State briefly the audit objectives that are addressed by the following audit procedure: “Confirm accounts receivable and notes receivable by direct communication with debtors.”

11–16. Several accounts receivable confirmations have been returned with the notation, “Verification of vendors’ statements are no longer possible because of our data processing system.” What alternative auditing procedures could be used to verify these accounts receivable?

11–17. What alternative auditing procedures may be undertaken in connection with the confirmation of accounts receivable where customers having substantial balances fail to reply after second request forms have been mailed directly to them?

11–20. In connection with an audit, what are the purposes of a review of sales returns and allowances subsequent to the balance sheet date?

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