Which of the Following Types of Documentary Evidence Should the Auditor

question 3

Multiple Choice

Which of the following types of documentary evidence should the auditor consider to be the most reliable?

• A)A sales invoice issued by the entity and supported by a delivery receipt from an outside trucker.
• B)Confirmation of an account payable balance mailed by and returned directly to the auditor.
• C)A check issued by the company and bearing the payee's endorsement that is included with the bank statement mailed directly to the auditor.
• D)A working paper prepared by the entity's controller and reviewed by the entity's treasurer.

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Definitions:

Accounts Receivable

Funds that clients or customers are yet to pay to a company for products or services that have already been provided or utilized.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity.

Long-term Liabilities

Financial obligations of a business that are due more than one year in the future, such as bonds payable, long-term loans, and lease obligations.

Accounts Payable

Obligations owed by a company to its creditors or suppliers for goods and services received but not yet paid for.