DISCUSSION QUESTIONS
1. Give examples of tests of controls to test the operating effectiveness of internal controls in the revenue and collection cycle.
2. Give examples of substantive procedures in the revenue and collection cycle and relate them to assertions about significant account balance at the end of the period.
3. How would you handle a situation where the days sales in receivables increased and overall accounts receivables increased, but the allowance for doubtful accounts has remained flat? Would you dig deeper with any other tests? What does this indicate?
4. It is not uncommon for customers to not respond to confirmations. Often an auditor will look to see if the customer has paid their bills when not responding to a confirmation. If the customer has not made any response to the confirmation or subsequently paid their bills, how would you handle this situation?
5. Give examples of tests of controls to test the operating effectiveness of internal controls in the acquisition and expenditure cycle.
6. Describe the payroll cycle including risks, source documents, and controls.
7. Do you go back and look at the collectability of accounts once they reach a certain number of days old? For example, for accounts that are 90 days old, the client normally only collects 50% of the outstanding balance. Would this not be an acceptable basis for estimating the allowance for doubtful accounts?
ANSWER EACH QUESTION IN 200 OR MORE WORDS
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