[naturewhr]

Six months after issuing an unmodified opinion on audited financial statements, an auditor discovered that the engagement personnel failed to confirm several of the client’s material accounts receivable balances. The auditor should first:

a. Assess the importance of the omitted procedures to the auditor’s ability to support the previously expressed opinion.

b. Perform alternative procedures to provide a satisfactory basis for the unmodified opinion.

c. Inquire whether there are persons currently relying, or likely to rely, on the unmodified opinion.

d. Request the permission of the client to undertake the confirmation of accounts receivable.

The answer is “a”. I think the question already told you it’s material accounts receivable balance, you shouldn’t assess the importance of the omitted procedures anymore. Why do you still choose a if the question is already told you it’s material account.

Also, can anyone tell me what’s the step auditors need to take for those type of questions? I know you need to determine the importance of the omitted procedures first. But what’s next? If there are people relying on the reports or if there are any other audit procedures can compensate for the omitted audit procedures?

FAR - 88
AUD - 91
BEC - 85
REG - 5/31

[csvirk]

This question basically ask you what would the first step if an auditor finds out about any omitted, so answer A would his first step followed by following steps to resolve the issue.

Inquire whether there are persons currently relying, or likely to rely, on the unmodified opinion.
Perform alternative procedures to provide a satisfactory basis for the unmodified opinion.
Request the permission of the client to undertake the confirmation of accounts receivable.

In future i would advise you to post youe AUD related question in Q1 AUD group study group. 🙂

Here is the link: https://www.another71.com/cpa-exam-forum/topic/aud-study-group-q1-2016

Good Luck!!

FAR: 71, 77!
AUD: 69, 80
BEC: 72
REG: 84

[FAR_WARS]

Maybe the question is telling us that the account balances are material, but the auditor does not yet know that they are material.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[Tripin93]

When they say “confirm receivables,” that refers to when customers are mailed confirmation reports of their account balance. The customer should return the confirmation in the mail to say “yes this is correct” or “no, this is incorrect.” *This describes a positive confirmation. A negative confirmation is when customers only need to mail in their report if an error is reported.

To answer your question, the key is that the auditor might have already performed OTHER procedures that support the A/R dollar amount reported on financial statements. Confirming accounts receiving is just one way to test the accounts receivable balance. There are many other ways to test the A/R balance.

If the other procedures provide enough evidence to support the reported amount, then no other action is necessary.

Here are a list of some of other procedures to test the accounts receivable balance:
1. After year end, observing cash collections to see if AR were paid off.
2. Observing the clerk as she or he is making the A/R journal entries.
3. Recalculate accounts receivable (go to the ledger and check footing. The re-total the general ledger to see if it's correct.)
*I can't think of too many other examples, because I'm not an auditor and I took the Audit exam a few months ago.

Motivated by JC. I do it to make God proud.

FAR: 91 July 2015
AUD: 83 October 2015
REG: 81 January 2016
BEC: 83 February 2016

[Author]

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