To determine whether any accounts receivable are pledged or assigned to others,the auditor would most likely perform which of the following procedures?
A)Examine subsequent collections.
B)Test a sample of transactions to the general ledger.
C)Review loan agreements and board of directors' meeting minutes.
D)Derive an independent estimate of the allowance and compare it to pledged assets.

Question

Quizplus · Accepted Answer

The most likely way to determine whether any accounts receivable are pledged or assigned to others is by reviewing the loan agreements and board of directors' meeting minutes. These documents are likely to contain information about any arrangements where accounts receivable have been pledged or assigned to others. Therefore, this would be the most appropriate procedure to follow. Examining subsequent collections would not provide conclusive evidence of accounts receivable being pledged or assigned. Testing a sample of transactions to the general ledger and deriving an independent estimate of the allowance and comparing it to pledged assets are unrelated to the objective of determining whether accounts receivable are pledged or assigned.

To Determine Whether Any Accounts Receivable Are Pledged or Assigned