Question

1. King, CPA, is auditing the financial statements of Cycle Company, a client that has receivables from customers arising from the sale of goods in the normal course of business. King is aware that the confirmation of accounts receivable is a generally accepted auditing procedure. Under what circumstances could King justify omitting the confirmation of Cycle's accounts receivable?

2. What alternative procedures could King consider performing when replies to positive confirmation requests are not received?

3. After checks are signed for vendor invoices, why should vouchers be marked PAID or otherwise mutilated?

4. List three sources of evidence/information for the search for unrecorded liabilities.

Answer 1

1. There are certain circumsatnces could king justify omitting the confirmation of cycle's a/c receivables .they are

1. auditor have previous experience and knowledge about this.

2. if the account receivable is immaterial or not material

3.procedures like analytical and substantial provides competitive and substatial evidence.

2. if king does get any positive confirmation , he need to further his procedure and   find misstatement himself .if there is any misstatement he must investigate to determine if it is fraud or not. Alternative procedures can vary according to the account.he must analyse receipt and payment is matching or not

3. After checks are signed for vendor invoices, the vouchers be marked PAID because To show they have been processed so they cannot be paid again.

4. files,management ,documents .