Reference no: EM132909701

True or False? (Financial Audit)

1. The department approving a sales transaction should be the shipping department.

2. Accounts receivable that are written-off should not be turned over to a collection agency.

3. An aged trial balance of accounts receivable may provide evidence on the adequacy of the allowance for uncollectible accounts.

4. Confirmation of accounts receivable by direct communication with the debtor tests the existence of accounts receivable.

5. Confirmation requests should contain a "business reply" envelope addressed to the auditors at the client's address.

6. CPAs use negative accounts receivable confirmation requests more frequently than positive accounts receivable confirmation requests.

7. Confirmation of accounts receivable provides some assurance that no lapping or other manipulation affecting accounts receivable is being carried on.

8. Analytical procedures are used by auditors to gain evidence about the adequacy of the allowance for uncollectible accounts.

9. When it is impossible to confirm accounts receivable, the auditors may be able to satisfy themselves as to the existence of accounts receivable by alternative procedures.

10. Material accounts receivable from related parties should be stated separately from other receivables.

Give the example of analytical procedure that an auditor might use to estimate total revenue for a household appliance manufacturer and for an airline.

Give 2 examples of analytical procedure that an auditor might use to estimate gross margin for company.