Question
You are involved with the audit of Jelco Company for year 1 and have been asked to consider the confirmation reply results indicated below. For
You are involved with the audit of Jelco Company for year 1 and have
been asked to consider the confirmation reply results indicated below.
For each confirmation reply, select the proper action to be taken from
the following possible actions:
(1) Exception; propose an adjustment.
(2) Send a second confirmation request to the customer.
499
(3) Examine shipping documents and/or subsequent cash receipts.
(4) Verify whether the additional invoices noted on the confirmation
reply pertain to the year under audit or the subsequent year.
(5) Not an exception; no further audit work is necessary.
Customer Reply (and any audit action already taken)
Proper
Action
a. "We mailed the check for this on Decemberl 31."
b. "We returned those goods on December 2." You have been able to determine that
the goods were received by the client on December 29, but not recorded until
January 2.
c. "We also owe for two more invoices for purchases we made around year-end; I'm
not sure of the exact date."
d. "We are very satisfied with Jelco and plan to purchase from them in the future."
e. "While that's what we owe, we didn't owe it on December 31 because we didn't
receive the goods until January 2 of year 2.
f. " You received no reply to a negative confirmation request to Adams Co.
g. You received no reply to a positive confirmation request to Blake Co. Subsequently
you recalled that Blake Co. has a policy of not responding to confirmationsin
writing or orally.
My question is; what is the proper action for g? Is it (2) or (3)?
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