You have examined the financial statements of Boiestown Limited for several years. Internal control for accounts receivable is very satisfactory. Boiestown Limited operates on a calendar-year basis. An interim audit, which included confirmation of the accounts receivable, was per¬ formed on August 31 and indicated that the accounting for cash, sales, sales returns and allowances, and receivables was reliable.

The company's sales are principally to manufacturing concerns. There are about 1,500 active trade accounts receiv¬ able of which about 35 percent represent 65 percent of the total dollar amount. The accounts receivable are maintained alphabetically in a master file of accounts receivable.

Shipping document data are entered into a computerized system that produces a sales invoice and sales journal, and updates the open item transaction files and the customer master file.

All cash receipts are in the form of customers' cheques. Information for cash receipts is obtained from the remittance advice portions of the customers' cheques. The person who enters the receipts into the computer system compares the remittance advices with the list of cheques, which was pre¬ pared by another person when the mail was received. As for sales, a cash receipts journal, an updated open item transac¬ tion file, and a customer master file are prepared when the cash receipts information is entered.

Summary totals are produced monthly by the system for updating the general ledger file accounts such as cash, sales, and accounts receivable. An aged accounts receivable trial balance is prepared monthly.

Required Prepare the additional audit procedures necessary for testing the balances in the sales and collection cycle. (Ignore bad debts and allowance for uncollectible accounts.)

(AICPA adapted)