The following are various changes in audit circumstances.
Audit Circumstance
The client began experiencing an increase in returns due toproduct changes that resulted in increased defects.
You found several pricing errors in your substantive tests oftransactions for sales.
In performing substantive tests of transactions for cashreceipts, you found that receipts were promptly recorded incustomer accounts, but there were delays in depositing the receiptsat the bank.
The client entered into a new loan agreement with the bank.Accounts receivable are pledged as collateral for the loan.
The client did not reconcile the accounts receivable subsidiaryrecords with the accounts receivable balance in the general ledgeron a regular basis.
Substantive analytical procedures indicated a significantslowing in accounts receivable turnover.
The client entered into sales contracts with new customers thatdiffer from the client’s standard sales contracts.
The client had a significant increase in sales near yearend.
Accounts receivable confirmations were ineffective due to a verylow response rate in the prior-year audit.
Match each change in audit circumstance with the most likelytest of details of balances response. Each response is usedonce.
Required
Expand testing of sales returns after year end and compare thelevel of returns with the prior year.
Send positive confirmations that include requests forinformation on side agreements and special terms.
Increase the number of accounts traced from the accountsreceivable trial balance to the accounts receivable subsidiaryrecords.
Expand the review of cash receipts after year end to evaluatethe collectibility of accounts receivable.
Increase the sample size for sales cutoff testing for salesrecorded before year end.
Send a confirmation to the bank confirming amounts pledged ascollateral under loan agreements.
Increase the sample size for positive confirmations of accountsreceivable.
While at the client’s premises at year end, obtain informationon the last few cash receipts at year end for cash receipts cutofftesting.
Perform alternative procedures to test the existence andaccuracy of accounts receivable instead of sending positiveconfirmations.
