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The Auditor Determines That Both of the Following Objectives Will

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The auditor determines that both of the following objectives will be part of the audit of Anthony Co.For each of the following audit objectives,select the substantive test that would most likely provide support for the objective.A substantive test may be used once,more than once,or not at all.
 Objective  Substantive  tests  1. Verify existence of accounts receivable.  2. Determine that accounts receivable are valued  at their net realizable value.  3. Determine that proper receivable disclosures  are presented. \begin{array} { | l | l | } \hline { \text { Objective } } & \begin{array} { c } \text { Substantive } \\\text { tests }\end{array} \\\hline \text { 1. Verify existence of accounts receivable. } & \\\hline \begin{array} { l } \text { 2. Determine that accounts receivable are valued } \\\text { at their net realizable value. }\end{array} & \\\hline \begin{array} { l } \text { 3. Determine that proper receivable disclosures } \\\text { are presented. }\end{array} & \\\hline\end{array} Selection List
A.Perform tests of subsequent cash receipts after the balance sheet date.
B.Review and assess an aging schedule of accounts receivable.
C.Compare recognized revenue to related industry statistics.
D.Tour the storage facility for inventory to determine adequacy of security controls.
E.Perform receiving cutoff procedures.
F.Review payments to vendors subsequent to year-end.
G.Read the financial statements (including notes)for completeness.
4.The existence of which of the following is most likely to increase audit risk in an audit client?
A.Anthony Co.was started as a local family business and has received additional funding over the years from several investors.
B.A new CFO is redesigning Anthony Co.'s accounting policies and procedures.
C.Anthony Co.consists of three core business operations: product sales in its retail store,product sales to food and specialty stores,and food services.
D.Anthony Co.experienced significant sales growth during its history and continues to expand its product offerings and market reach.
5.Which of the following is most likely to increase days' sales in accounts receivable at the end of the year for Anthony Co.?
A.Credit terms were restricted on several large accounts during the current year.
B.Operating expenses increased at a higher rate than sales revenue.
C.Sales revenue increased at a higher rate than operating expenses.
D.A smaller percentage of sales occurred during the last month of the year,as compared to the prior year.
E.A larger percentage of sales occurred during the last month of the year,as compared to the prior year.


Definitions:

Excitatory Potential

The likelihood that a specific event will elicit a specific response.

Drive Reduction

A theory of motivation suggesting that behaviors are motivated by the desire to reduce internal states of tension.

Incentive Motivation

The idea that the level of motivation is affected by magnitude of reward: The greater the reward magnitude, the higher the motivation to obtain that reward.

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