You have been assigned to the first audit of the accounts of the Holland Company for the
Question:
You have been assigned to the first audit of the accounts of the Holland Company for the year ending March 31, 19X8. The accounts receivable were circularized at December 31, 19X7, and at that date the receivables consisted of approximately 200 accounts with balances totaling \($956,750.\) Seventy-five of these accounts, with balances totaling \($650,725,\) were selected for circularization. All but 20 of the confirmation requests have been returned; 30 were signed without comments, 14 had minor differences which have been cleared satisfactorily, while 11 confirmations had the following comments:
1. "We are sorry but we cannot answer your request for confirmation of our account as we use an accounts payable voucher system."
2. "The balance of \($1,050\) was paid on December 23, 19X7."
3. "The above balance of \($7,750\) was paid on January 5, 19X8."
4. "The above balance has been paid."
5. "We do not owe you anything at December 31, 19X7, as the goods, represented by your invoice dated December 30, 19X7, number 25,050, in the amount of \($11,550,\) were received on January 5, 19X8, on f.o.b. destination terms."
6. "An advance payment of \($2,500\) made by us in November 19X7 should cover the two invoices totaling \($1,350\) shown on the statement attached."
7. "We never received these goods."
8. "We are contesting the propriety of this \($12,525\) charge. We think the charge is excessive."
9. "Amount okay. As the goods have been shipped to us on consignment we will remit payment upon selling the goods."
10. "The \($10,000\) representing a deposit under a lease, will be applied against the rent due to us during 19X9, the last year of the lease."
11. "Your credit dated December 5, 19X7, in the amount of \($440\) cancels the above balance." What steps would you take to clear satisfactorily each of the above 11 comments?
Step by Step Answer:
Auditing Concepts And Methods A Guide To Current Auditing Theory And Practice
ISBN: 9780070099999
5th Edition
Authors: Mcgraw-Hill