Question

06-10 You are the audit supervisor of Hasel Co, which is a manufacturing company. You are currently planning the audit of trade receivables for the year ended 31 December 2008. At 31 December, Hasel's trade receivables balance was $6.500.000. Hasel Co has more than 600 customers, including nine customers owing more than $250.000 each. Tests of control revealed weaknesses in Hasel's internal control over sales and trade receivables. In prior year audits, confirmations revealed misstatements in several customers' account balances. 6. Tests of control revealed that there is often a delay between Hasel Co's delivery of goods to customers and the subsequent raising of sales invoice. Complete the sentence below to describe a test to establish the extend of any understatement of receivables at the year end. The auditor should compare sales order/ goods despatch notes/ sales invoices/ the sales ledger shortly before/after the year end with sales order/ goods despatch notes/ sales invoices/ the sales ledger 7. Select the type of confirmation request that should be sent to Hasel Co's customers with a valid reason for that type of confirmation. The confirmation request should be negative/ positive because Hasel Co's customers are expected to ignore the confirmation request/ misstatements were revealed in the prior year/ the risk of material misstatement is high/ there is large number of small balance account

Answer 1

Part 6
The auditor should compare the GOODS DESPATCHED NOTES shortly BEFORE the year end with THE SALES LEDGER.
Part 7
The confirmation request should ne POSITIVE because THE RISK OF MATERIAL MISSTATEMENT IS HIGH.
Part 8
Option A is correct because there is a possibility that a payment received from the party has not been recorded.
Part 9
Option A and D are correct
Part 10
Option D is correct .