After Completing the Testing of Controls Over Cash Receipts and Sales

question 47

Multiple Choice

After completing the testing of controls over cash receipts and sales adjustments, the auditor assesses the level of control risk to be higher than expected. How would this affect the auditor's substantive audit work on accounts receivable?

• A) More work would need to be performed to ensure that the allowance for doubtful debts is fairly stated.
• B) Less work would need to be performed on following up non-responses from the auditor's debtors' circularisation.
• C) The auditor may consider changing the date of the debtors' circularisation from one month before the year-end, to the actual year-end date.
• D) More analytical review tests could be performed on debtors as a substitute for other substantive tests.

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Definitions:

Standard Deviation

A measure of the dispersion or spread of a set of data from its mean value.

Process Distribution Mean

The average value or central tendency of a distribution for a process' outcomes over a period of time.

Common Variation

Variability in data that is shared among all observations or variables being studied.

Randomly Occurring

Randomly occurring refers to events or phenomena that happen without a predictable pattern, often analyzed in probability and statistics to understand patterns and occurrences in data.