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8/19/2019 Cash and Accounts Receivable
1/11
/
br(a TaeA
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int
' (
f
15.
a
16.
L7.
-.
r/ta.
19.
20.
?r,
22.
23.
24.
25.
26 .
27.
P150,0001
90,00q
3,000
12,0O0
30,000
6,OO0,OOO,I
(300,000)
1,500,000r1
60,000
60,000
45,000
10,0004
1,OOO,0OO
30,o001
600,0001
900,o00
2,250,OAO
1,500,00O1
225,AOO
67,500
459-ago
7,125,offi
(675,OO0)
450"OOO
500,000
2,475,OOO
1,OOO,OOO
The Reviar
School
of
tTel.
No. 735-9807{
AUDITING
PROBLEIIIS
I RET{EO/
ESPEN LLA
I
IA]II
ES
CASH,AND RECEIVABLES
PROBLEM
1: You
gathered
the following nformation
n relation
to
your
audit of SAP
CORP.
or
the.yearended December31, 2008:
&A*
' /
L Traveler's
check
l/
2. Bank
drafts and money orders
3.
Unused
postage
stamps
4. Employee
check
dated 2009, recorded
as 2008
.
5. I,OU
rom
a key
officer
/
6.
Current
account at
PNB Bank
7.
Cuirent account at EquitableBank
r'
B.
.Curent
account
at BPI
-
fayroll Account
9.
I,eFtricted
oreign
bank
qccount
(in
USD)*x
10.
Credit
memo from
a vendor for
a
purchase
return
^11.
Customer'S
check returned
by the bank marked
DAUD,
return not
{
(
yet recorded in 2008
12.
.Change
und
13.
Bond
sinking
fund
t6 be used to
settle bonds
payable
due 2015
14. Petty
cash
fund
(P12,000
n currency
and expense vouchers
or
18,000)
fireasury
bills, due 3l3Ll09
(purchased
zl3Ll0e)
Treasury
bifls;
due tl3Ll0g
(purchased
L/l/08)
Other rade accounts eceivable
unassigned
Tradeaccounts
eceivable
factored n
20O8,
amount received
from factorlng s
1,200,000, actoringnot recorded
et
in 2OO8
Trade
accounts
n which
post-dated
hecks r"e
eld
(no
entries
were made
on
receipts
of
checks)
Trade r€ceivables
rom
officers drc cr,rmtly
#l*rce
patgn€ftsto
€*lrfuson
F
rdre
or-ebrs,M
Advances o an associated ompany
Credit balances n customers'account
ue
to sales eturn
Interest
receivable
n
investment
n bonds
Interest
payable
on
bonds
Subscriptlons
eceivable
rom ordinary
shares
due in
30 days
-,i-r
Trade note
receivables
2.
1.
**current
exchange
ate as of December
31,
2008 is at P50
or every USDI.
What s
th€
tota
iash and cashequivalent
o be
reported
by the comparry
s of
-DBcember
31, 2008? dw,W
What s the total tradereceivableso be reported s of December 1, 20OB?
3.
How
much
s
the total other receivables
s of December
31, 2008?
PRQBLEI'| 2: You were able
to
gather
the following
from
the December 31, 2008
trial balance
of
RHEA
NC. n connectionwi th
your
audit of the
company:
t
Petty
cash
fund
Cash on hand
Cash n
bank
-
Metrbbank
current
Cash' inbank
-
BDOAcct No. 1
Cash n bank
-
BDOAcct
No. 2
Cash n bank
-
Cocobank
savings
Time
deposits
-
BPI
50,000 w
1,500,00p rTo@
4,000)0004lbo@
iit3r,3ts3 u'w
4,500,000'
2,ooo,00Q
8/19/2019 Cash and Accounts Receivable
2/11
fuSAr
The Review
School of
Amuntancy
The
petty
cash fund consistedof the iollowing items
as
of Decembei3l, 2008:
Currency and colns
P10,000q
/
Empfoyees'vales
10.t,
uivatdt
8,000.'
Currency
n
an envelope
m6rked
"collections
or
charity"
,
,
with names
attached
6,000
n Unreplenished
petty
cash
vouchers
6,500
Check drawn by RHEA,
payable
o the
petty
cashier.
20,000{
-
'
Unused
Postage
stamps
tt1vrut
alttrraq
.d.\44
"
"5
1'aial
at,ht,(
_LrIQg_
P52,000
Cash on hand represents
undeposited collections
as of December
31,
?008
and
includes
the
follbwing items:
a. Customer's check for P160,000
returned
by
bank
on December
26,20O8 due
to
insufficient und
but subsequently redeposited
and cleared
by the
bank
on January
3,
zoo9.
b. Customer's
check
for
P80,000 dated
January 2,2OgO,
received
on December
29,2008.
c.
A
customer check for P90,000
dated June 1, 2008
received
on the same date
and
yet
to
be deposited since he
same has
been
missing.
d.
Postal
money orders received
from customers,
P100,0O0.
Included among
the
checks
drawn
by
RHEA
against
the Metrobank
current account and
recorded n December2OO8 re the following:
a. Check writteri'on
Dilcember
29,
2OAA dated
January 2, 2OOg,
delivered
to
payee
on
December 29, 2OO8,
P160,000.
b.
Check
written
and dated'December
29,
2008
and
delivered
to
payee
on January 2,
2OO9,
P200,000.
The credit
balance
in
the BDO Current
Account No.
2 represents
checks
drawrt
in
excess of the
deposit
bal4nce.
These
checks werb
stilt
outstanding
at
December
31,
2008.
The
savings account
deposit
in
Coco Bank has
been
set by
the board
of directors
fior
acquisition
of
new
computers. This
account
is expected
to
be disbursed
in
the next 3 months from
the
balance heet
date,
The
time deposit
with
BPI
was
purchased
n lrlorrember
,
1, 2OO9.
DeJerminehe audted balances
f
the
following:
A
r.
Petty
cash
und
2008
and shall rnatureon
Noverfiber
a.
30,000 b.
36,000 c,
10,000
d. 24FAO
0
2.
Petty
cash.shortage/ov€rage
a.
4,000
short b. 5,5OO
hort
c.
2,0Oo
ver d.
500
over
83.
Cash
n
hand
a. 1,070,000
.
b. 1,170,000 c. 1,260,000
d.
1,500,000
,r
9
4.
Cash
n bank
-
Metrobank urrent
-
a. 4,000,000
b. 4,160,000
c. 4,200,000
d.
4,360,000
.i
A
5.
Cash
and cashequivalentso
be
reported n
the 2006
batance
heet
o. 8,560,000. b.
8,566,000
c. 10,560,000
d, 15,060,000
eBAEliEE3i
A
count
of
the
Petty
Cash
Fund having
an
imprest balance
of
P10,000
of Reyes
Corp.
showed
ts
composition
as
follows:
P
2,g0q
Coins ndcurrency... . . . . . . . . . . . . .
'
Paid ouchers:
'
a#r:rnPettY
cash
-eceiPt oucher
zlt '
/
The
petty
cash receipt voucher is for
a return
of travel
expense
advance.
3,000
11000
?44-
c_lgqr
'
500, ' .
8/19/2019 Cash and Accounts Receivable
3/11
RgSA:
T.he
Review School'of
Aaountancy
e
What
s
he
petty
cash
hortage?
b. 500
'
" .
i
Page3of6
d. 1,000
.O
c. 9004
Ad$usudtttty
h
firilz
.rt@
A
pROBLEM
4:
A count
of
the undeposited
eceipts under
the custody
of U.
Rita, cashier
of Ube
-
C*p-,
""
S-ptember
30,
20OB
showed the
following composition:
.\
8/19/2019 Cash and Accounts Receivable
4/11
QSA;
The
Review
Sciltool.of
ccountahcy
*
Page 4
of 6
PROBLEIL|: You
obtained
he
following nformation
n the
currentaccount f
BUGOY
ORP.
During
your
examination
f
its financial
tatementsor
the
year
endedDecember 1, 2008.
The
bank
statementon November
0,
2O08
showeda balance
f
P918,000.
Among
he bank
.credits
in November was
customer's
note for P3OO,OOO
ollected for
the account of
the
.company
which he company ecognlzedn
December
mong ts receipts.
Included n
the bank
debitswere costof
checkbooks mounting o
P3,600
and
a P120,000
heckwhichwas
charged
by the bank in irror againstBugoy'saccount. Also n November ou ascertainedhat there
weredeposits
ntransit
amounting
o
P240,0O0
nd out$tanding
hecks
otaling
P510,000.
The
bank
statement or
the
month
of Detember
showed
otal credits
of Pt,248,000and total
chargesof
P612,000',
The
company'sbooks
or
December
howed
otal debits of
P2,2A6,800,
total
credits of
L.,221,600 nd
a
balanceof P1,456,800.
Bank debit
memos for December
were: No. 121
or service
charges,
P4,800and
No. 722
on a custorner's
eturned
check
marked
"Refer
o
Drawer" or
P72,OOO
On December31,
20Q8 he
company
placed
with
the bank
a
cdstomer's
promissory
note with
a
face value of P360,OOO
or collection. The
cgFnany
treated
this
note
as
part
of
its
receipts
although he b5nk
was
able o collecton
the note only
in Janua.ry,
009.
A check fcir P'11,880was recorded n the company cash payments books in December as
P118,800.
1. How mtJch s
the undeposited ollections
s of December
1, 2OOg?
a. 1,018,800 b. 538,800
c7 658,800
d. 418,800
2.
How
much
is
the outstanding checks as
of
December
31,
ZOO8?
a.
575,880
b.
1,192,800
c,
1,085,880
d.
1,089,480
3. How much
is
the adjusted cash
balance
as of N ovember
30,
2OO8?
a.
648,000
b, 768,000
c. 528,000
d.
47L,600
4, l'low
much s the adjusted ashbalance
s of December
1, 2008?
a. t,876,92O
b. 585p3€
c. 66O,OOO d. L,L.26,92O
\
PRODtlttl7: Folfowing he information
pertains
to the
Cash
n Bank
accoUntof
l'tango
Company
or
the
month of
April,2O08;
a..
Bs*ances
er
bank staternent
March
3t, PZt,560,
and
April 30,
p23,040.
b.
Balances
f
Cash n
Bank account
n
Company's
ooks::March
1,
P16,545,and April
30,
P22,680.
c.
Total receipt€
per
books
were F222,190
of which P1.210
was
paid
in cash to a
creditor
on
April 16.
d.
Total
charges
n
the bank statement
during
April
were P2L8,97O.
e. Undeposited
eccipts
were:
March31, P9,06O
nd April
30,
P10,120.
'
f. Outstanding heckswere: March 3li P2$75
and
April
30,
P1,930,
of
which
a check
or
P500
was certified
by
the bank on April22.
g.
NSFchecks eturned,
recorde_g _ag
eductions
of
cash receiptswere:
L1 ReturnedUy e
+O
.2.
Returned
y.Bank
n
April
but
recorded.in
May,P860.
h. Collections y
Bank not
recorded y company
were P12,150
n March,
and
P11,640
n
Apri l .
i.
.
Bankservice harges
not
entered n company's
ookswere: March
3L,
P75O, nd April
30
P420.
J.
A
check
or
P950of Marang
Company
was
charged
o Mango
Company n
error.
k. Acheck drawn or P840was
erroneously ntered n
the.books
s
P480.
Prepare four-column econciliation
f
receipts,
isbursements
nd
bank
balances
or April,
2008, using he form where he bankand book iguresare broughto corrected alances.
Preparehe
ournal
entries o
adjust
h.eCash n Bankaccount
t April
30.
i
,
:-'
'.
l
. :
8/19/2019 Cash and Accounts Receivable
5/11
RqSA;
The
Revierr
School of AaountaQcy
-
,
i
Page
5 of
6
PROBTEM
8l
The following
T-accotrnt
summarizes.the
ransactionbaifecting the
accounts
receivableof Grandia Company
for
2008.
7Jan.
L balance
after
deducting
creditbaldnce
f P3,000)
,/Charge
ales
Chargeor goodsout on
consignment
Shareholders
ubscriptions
TAccounts
written off
but recovered
€ash
paid
on customer
or
Jan.
1
credit
balance
Deposit
n
contract
Claimagainst
ommon
arrier
or
shipping
damages
IOUs from employees
Cash advance
o affi l iate
Advance o suppl ier
-
Trade
Collections
rom
customers/
(including
verpayment f
P5,000)
Write
offs
Merchandiseeturns
Allowance
o customers
or
shipping amages
Collections
n carrier
claims
Collection n
subscription
nts
P53,000
625,000
5,000
3O,000
1,000
2,500
15,000
x,500
500
10,000
5,000
P620,000r.
3,500(-
2,500L
1,500r
1,000
15,000
1.
Prepareadjusting entries
to correct accounts
receivable.
(, Z. Wh.at
s
the correct
accounts
receivable trade balance?
a. 70,000
b.
61,000
c.
59,500
d.
.55,500
PROBI.EM
:
In
your
audit
of JAMESCOMPANY
or
the
year
2008,
you
concluded
hat
the
allowanc.e
or
doubtful
accounts houldbe
adJustedo equal the estimatedamount
required
basedon
agingof the
accounts
s of December 1. During
youqaudit,you
were
able
o
gather
the'fol lowing
ata: '
l ( * '
Zts"
fr'ndr*\
za(
Allowance
or
doubtful
accounts, an 1, 2OO8
P600,000
Provision
or doubtful accounts
during
(2008
(3a/o
f 10MSales)
30O,OOft
Bad debts
written-off
in 2@8
+;-
375,009
Recovery f baddebtswritten-offduring2O0b 100,bO0
Estimated
oubtful
accounts
er
aging
of accounts n December 1, 2008
400,000
Accounts
eceivable,
ecember '1,
2008 2,375,OOO
I
D
1. Basedon the
result of
your
audit,
what is the
correct
doubtful accosnts
expense
or the
year
20O8?
a.
375,O00
b. 300,000 c.
175,O00
I
75,000
?75
2.
What is
the
correct
net book
value of
the
receivables?
a. 2,375,OOO
b. L,775,OOO
c. 2,000,000
,"
L,975,QOO
PBOQIEII
l9:
From
nceptionof operations o
December
31,
2008, PDA
Corporation
rovided
for uncollectibfe'accountseceivableunder the allowancemethod: prwisions were made
monthly
at 2o/o f credlt sales;
bad
debts wriften off
were
charged o the allowanceaccount;
recoveriesof
bad debts
previously
written off
were
credited o the allowance
aqcounUand
no
year-end
adjustments
o the allocation
ccount
were made.PDA's
sualcredit
erms are
net
30
days,
r allowance
or
doubtful
accountswas
P1]$OO0
at
January
1,
2008.
During
he balance n
the
allowance
or
dou
,2008,
credit salds
otaled.P9,000,000,
Dterim
provisions
or doubtful
accounts
were made at
2o/oof credit
sales;
P90,000
of
.bad
debts were written off, and
recoveries of accounts
.
previously
written
off amounted
o
P15,000.PDA nstalled
a
computer aciltty
n November,
')2008,
and an
agingof
accounts
eceivable
as
prepared
or
the
first time as of
December 1,
2008.
A summary f the
agihg
s as ollows:
co"ilis,g'
',,)&.
:*',-ffiVtn
Classification y
Monthof sale
Nov-Dec
008
Jul-Oct
Jan-June
Prior o LlI/O8
Balancen
Each
Category
P1,140,000
;-.
600,000
400,000
,
ut0.000
Estimatedo/o
Uncollectibl€
L.So/o
1 nn,
'8:0"
"
Q?to'tco
35.0
1* ' '
- -
fun
'
__
PL279,AOA
8/19/2019 Cash and Accounts Receivable
6/11
RsSA:
he Rwkw
Sdtool of
Aimuntancy
Further
audit
procedures
revealed
that
a P16O,OO0
ustomer
Credit
balance
resulUng
from
overpayment was included n
the "Nov-Dec.
2008'receivables
and that
based
on the
review
of
collectibility
of the account
balances in
the
"prior
to t/LlO9"
aging categorv, additional
receivables
otaling P60,000
were written
off as
of
December
31,
2008.
Effective
with
the
year
ended December
31,
2005,
PDA
adopted
the revised
accounting
standards
n recognizing
bad
debts.
.. 1
, t, . . , . . .
.
Pac6of6
42.
9,
3.
P
J..
what
is
the correct
balance f
the allowance
or
doubtful
accounts
t
year
end?
a. 254,100
b:256,5A0
c. 296,100
What is
the
correct
bad debt
expense
for
the
year?
a. 261,500
b, 201,500
c. 81,500
What is
the
carryihg value
of th e accoun ts receivable
at
year
end?
a. 2,013,500
b.
2,109,500
e 2,113,5OO
PBoq\Eil
lli
The'balance
sheet
of DWARF
CORP,
eported
the fotlowing
ong-term
receivables
s of
December
1, 2OO7:
i
Note
eceivable
rom
sale
of
plant
Note receivable
rom
officer
ey,ggAoril 1.
The nitial
pllcrpg_|gnd
interest(FEyllE\was
made_
n
April 1,
2008.
-Nur{il{Aev
_Adi-fq[r/i---T1c
.
rriq:ZnT---
----:*---.-..._._.;=
:
dt*\^J
.[r{
ltr*t'
i,lc
.
rf frrg
{:.,
-""..-'..._*-;='-,:
,
b. The note receivable
from
officer is
dated
December
3 ,
2OO7 earns
interest
at
.l_o"oZj
er
annum,. and
is due
on
December
31, zd}||.
The
2O08
interest
.was
received
qr
d. 298,500
d.
76,500
d. 2,370,0O0
d.
505,500
d. 756,000
P4,500,000
1,200,000
In connection
tth
your
audit,
you
were
abie o
gather
he following
ransactions
uring
2OOg
and
other
nformation
ertaining
o
the company'song-term
eceivables:
'
a.
The note
receivable
orm
sale
of
ptant
bears
nterest
at L2o/o
er
annum.
Th-enote
is
payable
n
3 annual nstallments
f P1,500,000
interest
on the
unpaid balanCe
becember
31, 2008.
-w:
c,"rr^t
* blofdt${0V
-
1,\.64{Alr.fhJ . ,- -
8/19/2019 Cash and Accounts Receivable
7/11
RsSA: The Review
School
of
Accountancy
..
:,,.:,
,
FaOa 7
cf,f
9
_
't
a
1.
Which
of the
following cash
fraud activities involves the
postBonement
of, he
recording of
receipts
and can
be
well
perpetiated
wfiere there is.
ack
of segregation of duties between recordkeeping and custodial
,
funct ions?
3: IitJls,g
*r
c. Windowdressing
d. .Salami
raud
2. An auditor
susfects that
a client's
cashier
s misappropriating ash receipts or
personal
use
by
lapplng
customerchecks eceived n the mail. In attempting o uncover his embezzlement cheme, he auditor
most
likely would compare he:
:
a.
Dates uncollectible ccounts
are authorized
o be written off with the dates he
write-offs are
actually
ecorded.
b.
Individual ank
deposits t ips
with the detailsof the m
8/19/2019 Cash and Accounts Receivable
8/11
RgSA:
The ReyiewSchoof,of
Accountancy
lrrp*
or
e
11.
Which
of the following h aracteristics
ostlikdly
wouldbe indicative
f check
kit ing?
a, High
urnover
of
employees
ho have
access o
cash.
b.
Many
arge
checks
hat
are recorded n.Mondays.
c.
Frequent TM
checking
ccount
withdrawals.
-
d. Low
average
balancd ompared
o high evel
deposits.
x)
12.
Which of the followingaudit
procedures'will
ikely detect or
uncover
kiting
activitiesof
the
client?
i
a.
Sending
onfirmationo banks.
b.
Vouch
check
ssuanies epresenting isbursementso
source
ocuments.
c. Render ashcounton a surprise asis.
d.
Simulteineously
alldate
bank
reconciliations
btements.
(x)
13. The usefulneqs f the standard
bank tonfirmation
requestmay
be
timited because
he
bank ernployeewho
completes he
form
may:
a.
Not believe
hat
the bank
s obligated
o
verify
confldential nformatiofr
o
a third
Barity.
b. Sign
ah retwn the form
without inspecting
he accuracy
of
the client 's bank reconciliation.
,
c.
.
Not
have
accesg o'the c lient's
cutolT
bank
statement.
,.
d. Be unawareof
afl the fihancial
elationships
hat
the bank'has
with the
client.
(x)
14. In
validating
bank
reconciliation
tatements
of
the client, the-auditor
should race back outstandingchecks
to the:
'
a.
Accounts
payable
voucher.
b. iancelled-checks
eturned
by
the bank.
.c.
Bank statementof the current
month.
d, Cut-offbank
statement
f
the subsequent
month.
(1)
15. In
validating he
bank
r€conciliation tatements
of the client,
the auditor should
race
back the unrecorded
debits,
ike
servicecharges
o
th€l:'
a. Accounts
payable
voucher.
b, Cancelled hecks
eturned
by the bank.
.
c.
Bank
statement f
the curent
month.
x)
d.
Cut-off
bank
statementof the subsequentmonth.
16, The
proof
of cash statements
s
usually
prepared
by t he auditor when:
a.
-
Internat
control
over.cash
s
strohg and control risk is
placed
at the
maximum.
b. lnterhal control over cash
s
weak and control risk
is
place
at the
maxlmum.
(x)
c.
Cashbalance
s very
signif icant.
d.
Cash
balance
s
very
insignificant.
.
17.
Which of
the following
proctdurcs
concerning
accounts rccelvable would
an
auditor niost'likely
perform
to
.obtain
evidential
mattdr in supportof an assessed
evel
of control risk
below he
maximum
evel?
i?.
Obsirving
an
entlty's
empbyec
prepale tfie
scheduleof
past
due
accounts
eceivable. x)
b.
Sending
conflrmation equests o ari entity's
prlncipal
customers o
verify
the
exisfenceof accounts
receivable.
c. Inspectingan entify's
analysisof
accounts
eceivable
or
unusualbalances.
d.
Comp;;i;n
"ni'tyi
,ni6lrectiUre
accounts
payable
to
actual
uncollecti.pJe
ccounts receivable.
18.
Which
of the
following
procedures
most
tikely
would n
8/19/2019 Cash and Accounts Receivable
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RsSA: The Review School
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sales
ournal.
x)
c. Compare he
invoiced
prices
on
prenumbered
ales
nvoices
o the entity's authorized
price'list.
d. Inquireabout he entityr5
redit
grantingpolicies
nd-the onsistent pp,licationf ciedit checks.
23. An auditor's
purpose
n reviewingcredit
ratings
of customerswith delinquentaccounts
eceivablemost
likely
s to
obtainevidence oncerning
management's ssertions
bout
a.
Valuation r alJocation.
x)-
b.
Presentation
nd disclosure.
c.
Existence r occurrence
d.
Rightsand obligations.
24.
' loachievegood
nternal ontrol,
whic.h epartment hould
perform
he activit ies f matching hipping
documents
with salesordersand
preparing
aitysales ummaries?
a. Bl l l ing
x)
b. Shipping
c. Credit
d. Safes roer
25.
Whichof
the
following
would
he auditorconsidero
be an incompatible
peration
or a cashier
f
th e
cashier
eceives emittances rom
the
mailroom?
a.
Posting
he
receipts
o
tlle accounts
eceivable
ubsidiary edger cards.
(x)
b.
Making he daily deppsitat the
local
bank.
c. Preparing he
daily deposit.
d. Endorsing
he
checks.
26. The most ikely
esultof
ineffectiventernal
ontrols
n the sales
ycle
s
that
a. Fiititiou. transactions
could
be recorded,
causing an understatement of
revenues
and
an
overstatement
of
receivables.
b. tregularities
in recdrding ransactions n the
subsidiaryaccountscould
delay
the
shipmentof
goods.
c.
Omissionof shippingdocuments
could
go
undetected, ausing
an understatenlent
f
inventory.
d.
Final
authorization
of
credit
memos by
personnel
n
the sales department could
permit
an employee
defalcation
cheme.
x)
27.
fsr
effective
nternal control, employees
maintaining
he
accounts eceivable
ubsidiary
edger
should
not
alsoapprove
.
a,
Employee vertime
wages,
b.
Credit
granted
to
cuitomers.
.
c.
Write-offsof
custorneraccounts.
x)
d.
eash
disbursements.
28.
During
an audit of the
accounts eceivabl€
unction,
you
found
that the
accounts
eceivable urnover rate
had fallen rom 7.3 to 4.3 over the last three
y'ears.
What is the mos t likely causeof the decrease?
a.
An
increase n
th€
discountoffered
or
early
payment
b,
A more
liberal
credit
policy
x)
c.
A change orm
net
30
net 25
d. Greatercash Sales
29. Shipping
documents
should
be
traces
o and compared
with
sales
ecords
or
invoices
6
.
a,
Determine
whether
payments
are
properly
applied
o customeraccounts.
l
b.
Ensure
hilt shipments
are billed o customers.
x)
c. Determine
whether unit
prices
billed
are in accordancewith
sales
contrads.
d.
Ascertain
whether
afl sales
are supportedby shippingdocuments.
30. An auditor
noted
hat
the
accountC
eceivable epartment
s
separate rom
other
accaunting
activities.
Credit
s
approved
by a s€paratecredit
department.Controlaccounts
and
subsidiary
edgers
are
balanced
monthly:
Similarly,
accounts
are
aged monthly.
The
accounts
eceivable
manager
writes
off
delinquent
accountsafter
one
year
or
sooner,
f a bankrupt€yor other unusualcircumstances involved.Credit
rnemoranda re
prenumbered
and
must
correlate
wlth
receiving
eiDorts.Whichof the
following
areas
could
be viewed as
an
internal control
weakness
f
the
above
organization?
a.
Write-cjffs f
delinguent
accounts
x)
b. Creditapprovals
c.
Monthlyaging
of
receivables
d.
Handling
f credit
memos
Sendingaccounts
eceivable onfirmation
etters ij the client'scustomers s consistent
with the auditor's
objective f
validating lient's
eceivable ssertion n:
a.
ExisteFce nd
rights
x)
b: Completeness
nd
valu€ition
c.
Completeness
nd rights
')
d.
Existence nd
valuation
Theauditors'analysis f the clientsagedaccounts eceivable chedules consistent ith the auditor's
objective
of
validating
client's
eceivable
ssertion
on:
a. Existence
b. Completeness
c.
Rights nd obligation
d.
Valuation
x)
31.
32.
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