QUESTION 4
The following misstatements are sometimes found in the sales and collection cycles account balances

a. Several account receivables in the accounts receivable subsidiary ledger are not included in the aged trial balance

b. cash received from collections of accounts receivable in the subsequent period is recorded as current period receipts

c. the allowance for doubtful debts is inadequate because of the clients failure to reflect the current downturn in the economy when determining the doubtful debts allowanced

d. several accounts receivable are in dispute as result of claims of defective merchandise

e. good shipped and included in the current period sales were returned in the subsequent period

f. long-term interest-bearing loans receivable from affiliated companies are included in accounts receivable.

Required:

For each misstatement a. explain one internal control that should prevent the misstatement. b. describe one test of details of balances audit procedure that the auditor can use to detect the misstatement