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16-26(Objective16-3)The following misstatements are sometimes found in the sales and collection cycle's account balances: Several cash receipts were posted to the incorrect customer accounts. A
16-26(Objective16-3)The following misstatements are sometimes found in the sales and collection cycle's account balances:
- Several cash receipts were posted to the incorrect customer accounts.
- A shipment made in the subsequent period is recorded as a current period sale.
- The allowance for uncollectible accounts is inadequate because of the client's failure to reflect depressed economic conditions in the allowance.
- Several accounts receivable are in dispute as a result of claims of defective merchandise.
- The pledging of accounts receivable to the bank for a loan is not disclosed in the financial statements.
- Goods were returned for credit on the last day of the fiscal year but the sales return was not recorded until the following fiscal year.
- Several accounts receivable in the accounts receivable master file are not included in the aged trial balance.
- One account receivable in the accounts receivable master file is included on the aged trial balance twice.
- Long-term interest-bearing notes receivable from affiliated companies are included in accounts receivable.
Required
- For each misstatement, identify the balance-related audit objective to which it pertains.
- For each misstatement, list an internal control that should prevent it.
- For each misstatement, list one test of details of balances audit procedure that the auditor can use to detect it.
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