The following questions concern auditor responsibilities related to the audit of accounts receivable. Choose the best response.
a. The auditor sends out positive accounts receivable confirmations for a client. Assuming a second confirmation is sent out to a major customer who still fails to respond, which action should the auditor take?
(1) Consider the nonresponse as a minor audit finding and use responding confir-
mations as a basis for test results.
(2) Issue a qualified opinion due to the lack of sufficient audit evidence.
(3) Send out a third confirmation request and, if no response, perform alternative
procedures.
(4) Provide the client a copy of the accounts receivable confirmation and request that
they obtain the information from the customer.
b. Which of the following is least likely to be a reasonable explanation for an increase in accounts receivable turnover?
(1) Early payment incentives for customers
(2) Tightening of credit policy
(3) Implementation of more aggressive collection policies
(4) Allowance of a new grace period for customer payments
c. An auditor who is auditing accounts receivable would least likely perform which of
the following tests?
(1) Select cash disbursements made shortly after year end and examine the support-
ing documentation such as receiving reports and vendor invoices.
(2) Confirm a sample of accounts receivables with the customers that owe the balances.
(3) Vouch cash receipts to the accounts receivables transactions.
(4) Obtain an aged trial balance of accounts receivable and trace the total to the gen-
eral ledger control account.
