Part I: The following issues listed below were not discovered by your audit team member. Required: Identify the one assertion that BEST pertains to each undiscovered issue. Explain why the assertion you selected pertains to each issue. (1 sentence each).
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Issue |
Assertion |
Explanation |
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1. The allowance for bad debt accounts (part of the net accounts receivable balance per the balance sheet) differs significantly from the audit team’s estimated range. |
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2. An accounts receivable confirmation indicated that the customer did not have an account with the company. |
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3. Service revenue recorded was never performed. |
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4. Checks from customers received in the mailroom were never recorded and deposited. |
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5. Some inventory in the warehouse appears to be obsolete. |
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6. Sales transactions made at the beginning of the following fiscal year were recorded and reported in the prior year income statement. |
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7. Confirmations indicated that there were liens and other restrictions on accounts receivable. |
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8. Cash disbursement transactions were not recorded at the correct amounts. |
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9. For a sample of shipping documents, the related sales were not recorded in the sales journal. |
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10. Long-term receivables and related party receivables were not reported separately in the financial statement footnotes. |
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11. A sample of sales invoices did not have a related shipping document. |