Assume an Account Receivable Confirmation Is Returned with a Note

question 25

Essay

Assume an account receivable confirmation is returned with a note to the auditor describing a difference between your client's records and the customer's records. Clearly describe below two potential non-misstatement timing differences that could cause a discrepancy between a client's receivable records and his/her customer's records. The timing differences you describe should be such that after investigation you would determine that your client's receivable balance is not misstated due to these differences.

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Definitions:

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, assigning weights to each number.

Moving Average

A statistical method used to analyze data points by creating a series of averages of different subsets of the full data set, commonly used in financial markets to identify trends.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Ending Inventory

Ending inventory refers to the total value of goods available for sale at the end of an accounting period.