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SSC Corporation auditors have determined the following objectives as part of their audit. While...

Question:

SSC Corporation auditors have determined the following objectives as part of their audit. While several procedures will ordinarily address an audit objective, select the procedure most directly related to the audit objective. Each procedure may be used once, more than once, or not at all.


Audit Procedures
1. Compare the recorded receivable total with recorded payables.
2. Obtain an understanding of the business purpose of transactions that resulted in the accounts receivable balance.
3. Review drafts of financial statements. Disclosure.
4. The review board of director minutes for approval of each customer's credit limits.
5. Review the aged trial balance for significant past due accounts.
6. Trace a sample of purchase invoices from the purchases journal to postings to accounts receivable and sales accounts.
7. Trace a sample of sales invoices from late in December to the sales journal and to postings in accounts receivable and sales accounts.
8. Vouch for year-end accounts receivable balances to supporting documents. Existence, Rights

a. All receivables that should be recorded are recorded as of year-end.

b. Recorded receivables are at appropriate net realizable values.

c. Recorded receivables exist.

d. The client has rights to recorded year-end receivables.

e. The presentation and disclosure of receivables are adequate.

Management Assertions:

When performing audit procedures, an auditor must consider the relevant management assertion, which relates to the test being performed. The assertions that are subject to testing are relevant in order to determine the objective of the test and the results of the test.

Answer and Explanation:

We can match the following audit procedures and objectives as follows:

Procedure Assertion
1. Compare the recorded receivable total with recorded payables. b. Recorded receivables are at appropriate net realizable values.
2. Obtain an understanding of the business purpose of transactions that resulted in accounts receivable balance. e. The presentation and disclosure of receivables are adequate.
3. Review drafts of financial statements disclosure. b. Recorded receivables are at appropriate net realizable values.
e. The presentation and disclosure of receivables are adequate.
4. Review board of director minutes for approval of each customer's credit limits. a. All receivables that should be recorded are recorded as of year-end.
c. Recorded receivables exist.
5. Review the aged trial balance for significant past due accounts. b. Recorded receivables are at appropriate net realizable values.
6. Trace a sample of purchase invoices from the purchases journal to postings to accounts receivable and sales accounts. b. Recorded receivables are at appropriate net realizable values.
c. Recorded receivables exist.
7. Trace a sample of sales invoices from late in December to the sales journal and to postings in accounts receivable and sales accounts. a. All receivables that should be recorded are recorded as of year-end.
8. Vouch year-end accounts receivable balances to supporting documents. a. All receivables that should be recorded are recorded as of year-end.
c. Recorded receivables exist.
d. The client has rights to recorded year-end receivables.


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External Audits of Financial Statements

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 8
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