Question

Customers having substantial year-end past due balances fail to reply after second request forms have been mailed directly to them. Which of the following is the most appropriate audit procedure?

a. Examine shipping documents.
b. Review collections during the year being examined.
c. Intensify the study of the client's system of internal control with respect to receivables.
d. Increase the balance in the allowance for uncollectible accounts.

Answer 1

The most appropriate audit procedure in this scenario is to intensify the study of the client's system of internal control with respect to receivables.

Step-by-step explanation:

The most appropriate audit procedure in this scenario would be c. Intensify the study of the client's system of internal control with respect to receivables.

This audit procedure would involve examining the client's internal controls related to accounts receivable, including their process for collecting overdue balances. By intensifying the study of the client's system of internal control, the auditor can gain a better understanding of why customers with substantial year-end past due balances have failed to reply to the second request forms.

Reviewing collections during the year being examined (b) and increasing the balance in the allowance for uncollectible accounts (d) may be appropriate audit procedures in other scenarios, but they are not the most appropriate in this case.