Question

When an auditor tests to determine if all existing accounts receivable are included in the aged trial balance, what can they rely on?

1) The self-balancing nature of the accounts receivable master file
2) The omission of all sales to a customer from the sales journal
3) Sending accounts receivable confirmations to customers with zero balances
4) Identifying unrecorded sales to a new customer for confirmation

Answer 1

An auditor can rely on the self-balancing nature of the accounts receivable master file, the omission of sales to a customer from the sales journal, and sending accounts receivable confirmations to customers with zero balances to test if all existing accounts receivable are included in the aged trial balance.

Step-by-step explanation:

When an auditor tests to determine if all existing accounts receivable are included in the aged trial balance, they can rely on certain procedures:

1. The self-balancing nature of the accounts receivable master file ensures that all accounts receivable transactions are recorded and included in the balance.
2. The omission of all sales to a customer from the sales journal helps ensure that all accounts receivable from that customer are included in the aged trial balance.
3. Sending accounts receivable confirmations to customers with zero balances can help identify any missing accounts receivable that should be included in the aged trial balance.

By performing these procedures, an auditor can reasonably determine if all existing accounts receivable are included in the aged trial balance.

Learn more about Auditing of accounts receivable here: