Auditing Assignment - Finance Module at University Name, Semester 1

This assignment solution addresses auditing concepts related to accounts receivable. The solution discusses the ineffectiveness of external confirmation, providing justifications for its limitations. It outlines scenarios where confirmation might not be reliable and suggests alternative audit procedures. Furthermore, the assignment details specific procedures to verify the accuracy of accounts receivable, including reviewing cash receipts, calculating the receivable report total, tracing the report to the general ledger, and testing invoices. The solution is designed to help students understand and apply auditing principles in a practical context, focusing on ensuring the reliability of financial data.

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

1AUDITING
Table of Contents
Answer to Requirement (a)..............................................................................................................2
Answer to Requirement (b).............................................................................................................2

2AUDITING
Answer to Requirement (a)
1. The process of external confirmation may be ineffective when based on the audit
experience of previous year with the same company, the response rate for properly
designing confirmation requests will not be sufficient.
2. Michele could also use the justification that he already knows the responses of the major
accounts receivables; and it is expected that these responses are not reliable.
3. At the same time, Michele could use the justification that the collective inherent risk and
control risk are low. It needs to be assumed that evidence from analytical procedures or
other substantive audit procedures would contribute in achieving low level of acceptable
audit risk.
4. There are situations when the audit client prevents the auditors from external
confirmation. This could be used by Michele as a justification.
Answer to Requirement (b)
1. Michele can review the cash receipts where he will verify the invoice payments made by
the customers for which he will wish to review copies of check so that they can be traced
through the bank account.
2. Michele can calculate the receivable report total where he will add-up invoices on the
ageing reports of accounts receivable for verifying the total amount traced to the general
ledger is correct.
3. Michele can trace the receivable report to general ledger where he will ask for period-end
ageing report of accounts receivable from which he will be able in tracing the grand total
to the accounts receivable amount in the general ledger.

3AUDITING
4. Michele can also test the invoices listed in the receivable report.