A risk of material misstatement in accounts receivable associated with the rights and obligations balance-related audit objective is that "consignment goods are recorded as revenue, overstating both revenue and accounts receivable." Which of the following tests of detail of balances would respond to this risk?
A) include confirmation of terms of sale with accounts receivable confirmations
B) check cash received after the year end and trace to accounts receivable master file
C) read the notes to the financial statements and compare to audited financial information
D) compare accounts receivable balances by customer last year end to this year

Question

Quizplus · Accepted Answer

Confirming the terms of sale with accounts receivable confirmations would help to identify if any consignment goods were recorded as revenue, as the terms of sale for consignment goods are typically different from those of regular sales.

A Risk of Material Misstatement in Accounts Receivable Associated with the Rights