QUESTION 2 A. The following are various changes in audit circumstances: Audit circumstances 1. Accounts receivable turnover has slowed significantly based on analytical procedure. 2. . The client engaged into sales agreements with new customers that were not the same as the company's usual sales agreements. 3. Near the end of the year, the client's sales increased significantly 4. Due to a low response rate in the preceding year audit, accounts receivable confirmations were ineffective. 5. Due to product changes that resulted in more faults, the client began to see an increase in returns. . 6. . In your substantive test of transactions for sales, you discovered various pricing mistakes. 7. You discovered that receipts were immediately recorded in client accounts, however receipts were delayed in being deposited at the bank, after conducting a substantive test of transactions for cash receipts. 8. The bank and the client signed a new loan agreement. For the loan, accounts receivable are pledged as collateral. 9. The client failed to reconcile the accounts receivable sub-ledger with the general ledger's accounts receivable balance on a regular basis. 2 a C. Required: Match each change in audit circumstance with the most likely test of detail balance as follows: a. Extend sales return testing after the end of the year and compare the level of returns to the previous year. b. Send positive confirmations with requests for additional information on side agreements and specific clauses. Increase the number of accounts traced from the accounts receivable trial balance to the accounts receivable sub-ledger d. Expand the review of cash receipts after year-end to determine the collectability of accounts receivable. For sales recorded before the end of the year, increase the sample size for sales cut-off testing. f. Send a confirmation to the bank confirming amounts pledged as collateral under loan agreements. g. Increase the sample size for positive accounts receivable confirmations. h. Obtain information on the last few cash receipts for cash receipts cut-off testing when at the client's premises at year's end. i. Instead of sending positive confirmations, use alternative techniques to verify the existence and accuracy of accounts receivable. e. [9 marks]