1) Your client is All's Fair Appliance Company, an appliance wholesaler. Select the most appropriate audit procedure from the following list and enter the number in the appropriate place on the grid. Provide a brief explanation of how the audit procedure would support the assertion you select. An audit procedure may be selected once, more than once, or not at all. The audit procedures are:

1. Review of bank confirmations and loan agreements

2. Review of drafts of the financial statements

3. Selection of a sample of revenue transactions and determination that they have been included in the sales journal and accounts receivable subsidiary ledger.

4. Selection of a sample of shipping documents for a few days before and after year-end.

5. Confirmation of accounts receivable

6. Review of aging of accounts receivable with the credit manager

Assertion	Audit Procedure	Explanation
a. Ensure that the entity has legal title to accounts receivable (rights and obligations)
b. Confirm that recorded accounts receivable include all amounts owed the client (completeness)
c. Verify that all accounts receivable are recorded in the correct period (cutoff)
d. Confirm that the allowance for uncollectable accounts is properly stated (valuation and allocation)
e. Confirm that recorded accounts receivable are valid (existence)