Planning the engagement

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    This forum is restricted to members of the associated course(s).

    vivek bansal
    Participant

    6. Question ID: CIA 594 1.24 (Topic: D. Determine Engagement Procedures and Prepare Work Program)
    Which of the following procedures would provide the most relevant evidence to determine the adequacy of the allowance for doubtful accounts receivable?

    A. Test the controls over the write-off of accounts receivable to ensure that management approves all write-offs.
    B. Confirmation of the receivables.
    C. Analysis of the following month’s payments on the accounts receivable balances outstanding.
    D. Analyze the allowance through an aging of receivables and an analysis of current economic data.

    My question is i am little confused between option B & D

    B:- This mentions about confirming the receivables which is relevant ,also coming from a third party so it is more reliable as compare to internal information from the client. However, confirmation obtained when receivables are due here we are talking about doubtful receivables.

    D:- Only apprehension is this is an internal information but quiet relevant

    Which one should we choose & why?

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    Brian Hock
    HOCK international

    Hello, Vivek,

    The key here is that we are looking for evidence that the allowance is the correct amount. Looking at the aging of the receivables will be better for this purpose since it will show us more directly how old all of the receivables are.

    Doing a confirmation would help us get this information, but the aging of the receivables would be the most effective and efficient way to assess whether or not the Allowance account is an adequate amount.

    Brian

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