An auditor's purpose in reviewing credit ratings of customers with delinquent accounts receivable most likely is to obtain evidence concerning management's assertions about: Group of answer choices Rights and obligations. Understandability of presentation and classification. Valuation and allocation. Existence.
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The auditor is reviewing credit ratings of customers with delinquent accounts receivable, which relates to the financial health and collectability of those receivables. Show more…
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Auditing standards define a confirmation as the "process of obtaining and evaluating a direct communication from a third party in response to a request for information about a particular item affecting financial statement assertions." The assertion for which confirmation of accounts receivable balances provides primary evidence is: a. Completeness b. Presentation & Disclosure c. Valuation d. Rights & Obligations e. Existence
Adi S.
When auditing the accounts payable balance on the balance sheet, an auditor’s procedures most likely would focus primarily on management’s assertion of Select one: a. Rights and obligations b. Existence c. Completeness. d. Presentation and disclosure
Sanchit J.
What factors should be considered when determining the sample size for tests of details — in this instance, the accounts receivable balance? What factors should be considered when determining the sampling method (e.g., random, monetary unit sample)? You are the experienced assistant auditor for Fuel Pro (the "Company"), whose audit is subject to the standards of the AICPA. The company develops, manufactures, and distributes fitness beverages. Your engagement team has identified risks of material misstatement related to the existence, valuation and allocation, and rights and obligations assertions of accounts receivable, specifically the risks of material misstatement that the client has recorded in sales and accounts receivable for sales and shipments that are not valid or are recorded at the incorrect amount. Your field senior has assigned you to test the accounts receivable balance by sampling and confirming balances with individual customers, which is a common audit test to address these risks of material misstatement. As part of your risk assessment procedures, you obtained an understanding of the Company's accounting policy, processes, and controls regarding the accounts receivable balance by performing procedures (including inquiries of management and process owners) and walkthroughs of the processes related to accounts receivable. As a result of these procedures, you understand that the accounts receivables balance is relatively homogeneous and consists of a high volume of low-dollar value transactions. You decide to use data analytics to obtain fact-based evidence and to corroborate your understanding of the accounts receivables balance. Based on your analysis, you identified one statistical outlier of $2 million, while the remaining balance aggregated to $20 million, which is made up of approximately 2,500 homogeneous transactions. Upon further inquiries about the $2 million transaction, you determined that it is a related-party transaction. Based on your analysis of the accounts receivable balance, you define the customer balance as the sampling unit. You determine that any balances greater than performance materiality should be selected for testing and therefore select the $2 million related-party transaction. You then determine that you would statistically sample the remaining population. The other relevant factors are as follows: - Performance materiality is $1 million. - Clearly trivial threshold is $70,000. - The population size, excluding the $2 million selected balance, is $20 million (no other items are above performance materiality). - The level of risk is determined to be "higher." - You are not relying on the operating effectiveness of internal controls. The client provided the accounts receivable population to you in electronic format. - Through the use of data analytics, you noted that the population had similar, positive value characters.
Sri K.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
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