14-30 (Substantive tests of accounts receivable) The following situations were not discovered by
an inexperienced staff auditor in the audit of the Parson Company.
1. Several accounts were incorrectly aged in the client
Solution
1. Several accounts were incorrectly aged in the
client's aging schedule.
Procedures: Compare age% to prior year AR -Analytical procedures.
Assertion: cutoff, Valuation and allocation.
2. The accounts receivable turnover ratio was far below
expected results.
Procedure: AR analytical test: AR/AP, AR turnover,etc.-Analytical procedures.
Assertion:Completeness, cutoff.
3. Goods billed were not shipped.
Procedure: Cutoff test of billing-test the last month invoices. Vouching to the shipping doc.-
Inspection of records.
Assertion: Occurrence, cutoff.
4. Some year-end sales were recorded in the wrong
accounting period.
Procedure: cut off test of billing-test invoices billed subsequent to year end.-Inspection of
records
assertion:Completeness, cutoff
5. Several sales were posted for the correct amount but to
the wrong customers in the accounts receivable ledger.
Procedure: Confirmation of billings-Confirmation
Assertion: Occurrence.

6. The allowance for uncollectable accounts was
understated.
Procedures: Test the ratio of allowance to old AR and compare to PY.
-Analytical procedures.
Assertion:Valuation and allocation
7. Several sales were entered and posted at incorrect
amounts.
Procedures: Confirmation of AR. -Confirmation
Assertion: Accuracy and valuation
8. Mathematical errors were made in totaling the accounts
receivable ledger.
Procedures: Foot AR aging.-Recalculation
Assertion: Accuracy and valuation
9. An unrecorded sale at the balance sheet date was
collected in the next month.
Procedure: Post subsequent cash to AR balance at YE. Reperformance. records.
Assertion: Completeness, cutoff.
10. Several fictitious sales were recorded.
Procedure: Confirm customer balance.-Confirmation.
assertion: Occrrence.
11. The pledging of some customer accounts as security for
a loan was not reported in the balance sheet.
Procedure: Review security agreements.-Inspection of record.
Assertion: Occurrence and rights and obligations.
12. Some year-end cash receipts were recorded in the wrong
accounting period.
Procedure: cash cutoff testing.-Inspectionof record.
Assertion: cutoff, occurrence, completeness.