Reference no: EM132524632

Question 1: Adem Hassen, CPA, was auditing ABC Company. Adem sent positive accounts receivable confirmations to a number of ABC customers. He received a number of returned confirmations marked "we do not confirm balances because we are on voucher system."

Required

Question 1A. List three audit procedures that Adem might use to ensure the validity of these accounts.

Question 1B. Identify and describe the two forms of account receivable confirmation requests and indicate what factors Adem should consider in determining when to use each.

Question 1C. Assume Adem has received a satisfactory response to the confirmation requests. Describe how Adem could evaluate collectability of the trade account receivable.

Question 2. Alem, CPA, is auditing AD wholesaling for the year ended December 31, 2018. Alem has reviewed internal control relating to the purchasing, receiving, trade accounts payable, and cash disbursement processes and has decided not to test controls. Based on analytical review procedures, Alem believes that the trade account payable balance on the balance sheet as of December 31, 2018, may be understated. Alem has requested and obtained a client prepared trade accounts payable schedule listing the total amount owed to each vendor.

Required

Question A. What additional substantive audit procedures should Alem apply examining the trade account payable?

Question 3. What type of audit report should the auditors generally issue in each of the following situations? Explain.

A. Client-imposed restrictions limit significantly the scope of the auditors' procedures.

B. The auditors decide to make reference to the report of another CPA firm as a basis, in part, for the auditors' opinion.

C. The auditors believe that the financial statements have presented conformity with IFRS/GAAP in all aspects other than that contingent on the outcome of a material uncertainty.