An auditor who wishes to substantiate the gross balance of the account "Trade Notes Receivable" is considering the advisability of performing the four procedures listed below. Which pair of procedures is best suited to this objective?I. Age the receivables.II. Confirm the notes with the makers.III. Inspect the notes.IV. Trace a sample of postings from the sales journal to the notes receivable ledger.Select one:a.I and IIIb.II and IIIc.I and IId.I and IV
Question
An auditor who wishes to substantiate the gross balance of the account "Trade Notes Receivable" is considering the advisability of performing the four procedures listed below. Which pair of procedures is best suited to this objective?I. Age the receivables.II. Confirm the notes with the makers.III. Inspect the notes.IV. Trace a sample of postings from the sales journal to the notes receivable ledger.Select one:a.I and IIIb.II and IIIc.I and IId.I and IV
Solution
The best pair of procedures to substantiate the gross balance of the account "Trade Notes Receivable" would be II and III.
II. Confirm the notes with the makers - This procedure involves reaching out to the individuals or entities that made the notes to confirm the amounts and terms. This can help ensure that the notes are legitimate and that the amounts recorded in the account are accurate.
III. Inspect the notes - This involves physically examining the notes to verify their existence and to check for any signs of tampering or fraud. This can also help confirm the amounts recorded in the account.
Therefore, the answer is b. II and III.
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