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Question 25

The following is an excerpt from an audit engagement workpaper:

✑ A Company

✑ Accounts Receivable

✑ Date

Objective. To determine if the computer system is correctly recording all accounts receivable transactions.

Procedures: Judgmental selection of a sample of all accounts receivable balances greater than $50,000 for positive confirmation of balances.

Conclusion: Based on the results of testing wherein all but three confirmations were returned, the accounts receivable balance is fairly presented in all material respects.

Which of the following is true regarding the workpaper?

It is not appropriate to judgmentally select a sample when testing accounts receivable.

A conclusion should be reached only for the results of overall testing, not for individual procedures.

The audit procedures used are not consistent with the audit objective.

The format of the workpaper does not conform to the standard format for workpapers.

Correct Answer: C

The audit objective is to determine if the computer system is correctly recording all accounts receivable transactions. However, the audit procedure described involves the judgmental selection of a sample of accounts receivable balances greater than $50,000 for positive confirmation of balances. This approach does not comprehensively test all transactions and therefore does not align appropriately with the stated objective, which implies the need for more inclusive testing methods.

Discussion

KCDUOption: C

I think this more aligns with the Objective vs. Procedure. The Objective says ALL A/R, whereas the procedure only call's for balances over $50K. This does not test for all, only those over $50K.

Mariecia

Confirmations test existence wherein tracing tests proper accounting/recording

[Removed]

Objective relates to transactions. Procedures tested account balances

az_zu

How does the procedure not conform with the objectives?

MomenOmran

When you objective is to ensure that all what should have recorded is recorded, U follow tracing procedure, but what has mentioned in the question is a voucher technique

chung002

thanks for sharing. what is the correct audit procedure then for tracing ?

theJMG

In my opinion, it correct procedure should be tracing sampled transactions from customer invoices to accounts receivable records, and checking it these are accurately captured.