Returns of positive confirmation requests for accounts receivable were very poor. As an alternative procedure, the auditor
Question:
Returns of positive confirmation requests for accounts receivable were very poor. As an alternative procedure, the auditor decided to check subsequent collections. The auditor has satisfied himself that the client satisfactorily listed the customer name next to each check listed on the deposit slip. Hence, he decided that for each customer for which a confirmation was not received, he would add all the amounts shown for that customer on each validated deposit slip for the two months following the balance sheet date. The major fallacy in the auditor's procedure is that
a. By looking only at the deposit slip, the auditor would not know if the payment was for the receivable at the balance sheet date or a subsequent transaction.
b. Checking of subsequent collections is not an acceptable alternative auditing procedure for confirmation of accounts receivable.
c. The deposit slip would not be received directly by the auditor, as a confirmation would be
d. A customer may not have made a payment during the two-month period.
Step by Step Answer:
Auditing An Assertions Approach
ISBN: 9780471134213
7th Edition
Authors: G. William Glezen, Donald H. Taylor