The auditor uses MUS to select accounts receivables for confirmation. In confirming individual accounts receivable balances, your client's customers reported the exceptions listed below.
Required
Which of these exceptions should be considered misstatements for evaluation purposes, assuming that misstatements are defined as
(a) Differences that affect the account balance and
(b) Differences that affect pretax income? Explain your reasoning in each instance.
1. The wrong trade discount was used.
2. The client charged sales tax to a tax-exempt customer.
3. The client failed to record returned merchandise.
4. The invoice contained a clerical error.
5. The payment was posted to the wrong customer's account.
6. The client failed to record a sale.
7. The payment was in transit at the confirmation date.
8. Freight was charged to the customer when the terms were FOB destination.
9. The customer subtracted a cash discount for a payment made after the discount period. The client decided to give credit for the discount taken.