This Year Is the First Time That, as a Normal

question 14

Multiple Choice

This year is the first time that, as a normal practice in a client's business, accounts receivable may be pledged, assigned, factored or sold at discount. The audit procedure which would disclose these practices would be:

• A) a review of the minutes of the board of directors' meetings.
• B) discussions with the client.
• C) examination of correspondence files.
• D) all of the above

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Definitions:

Negotiation

The process by which parties discuss their differences, with the aim of reaching an agreement or improving understanding.

Assignment

The passing of property or rights from one individual to another.

Indorsement

The act of signing one's name on the back of a cheque or other negotiable instrument to make it payable to someone else.

Without Recourse

A term indicating that the holder of a financial instrument, such as a note or bill, cannot demand payment from the original issuer in case of default by the borrower.