Question

An auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control account as of October 31. By this procedure, the auditor would be most likely to learn of which of the following?

a. An October invoice was improperly computed.
b. An October check from a customer was posted in error to the account of another customer with a similar name.
c. An opening balance in a subsidiary ledger account was improperly carried forward from the previous accounting period.
d. An account balance is past due and should be written-off

Answer 1

An auditor reconciling the total of the accounts receivable subsidiary ledger to the general ledger control account is most likely to discover an error where a customer's check was incorrectly posted to another customer's account. This process is designed to match the ledger totals and pinpoint such discrepancies.

Step-by-step explanation:

The question asks which scenario an auditor would most likely discover when reconciling the total of the accounts receivable subsidiary ledger to the general ledger control account as of October 31. The correct answer is (b): An October check from a customer was posted in error to the account of another customer with a similar name. Reconciliation of these ledgers is designed to ensure that the individual account totals match the overall ledger control totals and identify discrepancies caused by errors such as wrongful postings.

An invoice improperly computed (option a) would not necessarily be found since reconciliation focuses on ledger totals, not the accuracy of individual transaction amounts. An opening balance improperly carried forward (option c) could be caught if the error affected the total ending balance. As for an account balance that should be written-off (option d), this would not necessarily be flagged during a reconciliation process, as it relates to the collectability of the account rather than the accounting records per se.