Substantive Procedures on Cash & Receivables

Rank the reliability of the audit evidence, starting with the most reliable first.

1. 1) Bank reconciliation carried out by the cashier

2. 2) Bank confirmation report from Truse Co's bank

3. 3) Verbal confirmation from the directors that the overdraft limit is to be increased

4. 4) Cash count carried out by the audit junior

• 1,2,4,3

• 2,1,4,3

• 2,1,3,4

• 4,2,1,3

Which of the following summarises the steps Julie should take in preparing the bank confirmation letter

• written on the audit firm's headed paper; information requested to be sent directly to the auditor

• written on the client's headed paper; information requested to be sent directly to the auditor

• written on the audit firm's headed paper ; information requested to be sent directly to the client

• written on the client's headed paper ; information requested to be sent directly to the client

Which of the following pieces of audit evidence would provide the MOST reliable audit evidence that the lodgements recorded on 31 December 20x5 do not relate to amounts received after the period end

• Bank statement showing the lodgements cleared by the bank

• The date on the cheque paid by the supplier

• The date on the remittance advice

• The bank's date stamp on the pay in slip

The audit assistant has identified further procedures to be carried out in respect of the customer who has not responded to the circularisation request as follows :

1) send out a follow up request

2) inspect the sales invoices in the customer account at year end

3) ask the credit controller whether the customer exists

4) reconcile cash receipts after date with pre year end invoices in the customer account

Which of the procedures would provide audit evidence of the EXISTENCE of this receivables?

• 1,2,3

• 1,2,4

• 3&4

• 1&2

Which of the following statements concerning auditing accounting estimates is INCORRECT

• It can be difficult to obtain evidence concerning accounting estimates as management use judgement in their estimation

• Accounting estimates are high risk as they can be subject to management bias

• Auditors can formulate a point estimate to compare to managements estimate

• Auditors should use their own estimate in the financial statements as auditor generated evidence is more conclusive than management generated evidence

The audit junior has suggested the following tests could be carried out to test the allowance for doubtful accounts :

1) Review cash receipts after year end

2) Review an aged debt analysis of the sales ledger

3) Ask the credit controller what debts are considered to be doubtful

4) Review sales invoices relating to overdue accounts

Which of the following correctly ranks these tests in terms of their appropriateness to the VALUATION assertion (most appropriate being listed first)

• 1,2,3,4

• 2,4,3,1

• 1,2,4,3

• 3,2,1,4

Once an order has been verified the system produces a pre numbered picking note. The order is then picked in the warehouse and a GDN is produced. A copy of this is scanned into the system and a sequentially numbered invoice is automatically produced and sent to the customer.

Which of the following procedures would provide evidence that sales cut off for Porthon has been applied correctly?

• For sales invoices issued before 31 dec 20x7 use audit software to determine whether there is a matching GDN dated before 31 dec 20xx7

• For sales invoices issued before 31 December 20x7, use audit software to determine whether there is a matching GDN dated after 31 Dec 20x7

• For picking notes issued before 31 December 20x7, use audit software to determine whether there is a matching GDN dated before 31 Dec 20x7

• For picking notes issued before 31 December 20x7, use audit software to determine whether there is a matching GDN dated after 31 Dec 20x7

As part of substantive audit procedures, you perform a sequence check on the sales invoice numbers issued by Porthos over the year.

What is the purpose of the sequence check you have performed on the sales invoice numbers?

• To give assurance that cut off have been applied correctly

• To give assurance over the occurence of the sales transaction recorded

• To provide audit evidence over the completeness of the recording of sales

• To provide audit evidence that the sales figure have been calculated accurately

Your audit assistant has gathered the following audit evidence in relation to the bank and cash :

1) print out from Ash Co's online banking system provided by the accounts clerk

2) bank recon prepared by the audit assistant using client documents

3) Results of cash count performed by internal audit

4) Bank confirmation letter received from Silver Oak Bank

Which of the following options correctly ranks the audit evidence, starting with the MOST reliable?

• 2,4,1,3

• 2,3,4,1

• 4,3,1,2

• 4,2,3,1

Which TWO of the following actions should Willow & Co take following their client's refusal to allow Willow & Co to seek a bank confirmation from the client's bank?

• The risk of material misstatement including fraud risk needs to be reevaluated

• The audit plan must be revised and alternative procedures considered

• A modified opinion must be issued on the grounds that insufficient evidence is available

• Send the bank confirmation request without authorisation as the bank communicated directly with the auditor