Question

The auditor determines that both of the following objectives will be part of the audit of Anthony Company. For each of the following audit objectives, select the substantive test that would most likely provide support for the objective. A substantive test may be used once, more than once, or not at all. Objective Substantive tests 1. Verify existence of accounts receivable. 2. Determine that accounts receivable are valued at their net realizable value. 3. Determine that proper receivable disclosures are presented. Selection List A. Perform tests of subsequent cash receipts after the balance sheet date. B. Review and assess an aging schedule of accounts receivable. C. Compare recognized revenue to related industry statistics. D. Tour the storage facility for inventory to determine adequacy of security controls. E. Perform receiving cutoff procedures. F. Review payments to vendors subsequent to year-end. G. Read the financial statements (including notes) for completeness.

Answer 1

Following are the substantive test for the following audit objectives :-

S. No.	Objectives	substantive tests
1 .	Verify existence of accounts receivable (note 1)	A. perform tests of subsequent Cash receipts after the balance sheet date.
2 .	Determine that accounts receivable are valued at their Net realizable value (note 2)	B . Review and assess an aging schedule of accounts receivable
3 .	Determine that propose receivable disclosures are presented (note 3)	G . Read the financial statements (including notes) for completeness

Note

1. We can verify existence of accounts receivable by checking whether any payment have been received from them subsequent to balance sheet date if there is any payment coming with an amount which is shown in balance sheet in respect of a customer then it means that customer actually existed on balance sheet date.

2 . We can prepare aging schedule and accordingly determine bad debt if any and deduct that amount from receivable . This will help in showing receivable at net realizable value.

3 . To see proper disclosure relating to receivables we should look into financial statement including notes to accounts.