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audit procedure for receivables

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › audit procedure for receivables

  • This topic has 2 replies, 2 voices, and was last updated 7 years ago by mansoor.
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  • November 20, 2015 at 5:23 am #284076
    mansoor
    Member
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    q: which of the following audit procs provides evidence of valuation and existence of receivables at the year end?

    1. external confirmation from customer of the amount outstanding
    2. inspection of post year end bank statement to identofy payments by customers of balances outstanding at the year end

    in my infinite wisdom, i chose 1 because it was an external confirmation and the fact that i knew the balance.

    but the answer is 2.

    can u please explain y?

    November 20, 2015 at 7:10 pm #284215
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10194
    • ☆☆☆☆☆

    External confirmation helps with existence and ownership.

    However, imagine you owed a company money and knew you were going to find it difficult to pay. Then you receive a letter asking you to confirm the amount owed. If you didn’t reply you might raise suspicions. It might be a more devious plan to reply, confirming the balance so that your supplier suspected nothing, however, you really know that you can’t pay.

    November 20, 2015 at 8:24 pm #284227
    mansoor
    Member
    • Topics: 424
    • Replies: 542
    • ☆☆☆☆

    thanks

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