You are auditing the accounts receivable for ABC Company as of December 31, 2019 One of...

You are auditing the accounts receivable for ABC Company as of December 31, 2019 One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 8 had minor differences that have been cleared satisfactorily. Two of the responses had the following comments:

a. “We never received these goods.”

b. “The balance of $1,000 was paid on December 15, 2018.”

For each of these comments, identify the steps that you would take to clear (resolve) them.

Expert Solution

Reply (a)

Check the inventory records to verify whether the goods has been recorded as dispatched.

The delivery document shall be checked. Also, the Gate pass issued also is to be verified to ensure the goods has been sent to them from the factory or warehouse.

The document which certify the receipt of good by the party shall be obtained if any.

The details of goods in transit, damages during the logistics shall be checked to enure the goods are not lost or held unrecorded due to these.

Check the transactions in the ledger of the Particular Account Receivables to understand the nature of balance. For example, If it is the balance of previous year etc.

Reply (b)

The bank statement shall be checked to ensure that the receipt from the accounts receivable is not omitted to be recorded.

The cash book shall be checked to ensure there is no omission.

The Cash balance as per books shall be reconciled with physical cash available to ensure there is no error in the process.

ekkarill92 answered 2 years ago

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