Figure 9.5 is a copy of the auditor’s working paper for auditing accounts receivable balances for the client New Millennium Ecoproducts. It shows the details of the cut-off tests.

Required

a. Find the details of the transactions selected for cut-off tests. Why would these transactions be selected for testing?

b. Explain how the auditor has used documents to test the details of the transactions. Why are these documents relevant to the tests?

c. Have any errors or misstatements been revealed by the cut-off tests in this example?

Figure 9.5

Transcribed Image Text:

New Millennium Ecoproducts Dec. 31, 2020 CLIENT: Period-end: WAS PARTNERS $ 000 E04 – ACCOUNTS RECEIVABLE CUT-OFF Currency/unit: Reference E04 1. Comments relating our review of sales before and after year end (client's analysis by week, day...) E04.1 Reference of work done: Comments: / No unusual transactions or peak in sales detected. 2. Specific tests as per audit program Recorded in the proper period? Yes/No Customer name Invoice number Date in AR ledger| Amount TM/Ref Delivery date TM/Ref Comments Transactions recorded before year end 785 553 12/29/20 Brighter Bobs 12/29/20 25,000 Yes etc.... Transactions recorded after year end Grey Ghost 854 321 05/01/21 33,000 04/01/21 Yes etc... Key to audit tickmarks: / Agrees to invoice * Agrees to shipping document Comments: / No errors detected 3. Analytical procedures E04.2 Reference of work done: Comments: / No unusual transaction or peaks in sales detected.