PROBLEM 3

Von-Sanchez
Von-Sanchez Express
• Long-time audit client experiencing financial difficulty
• Sells specialized high-technology goods
• Received 32 out of 40 positive confirmation sent to
customers
Required:

a. Indicate the audit procedures (and be specific as to what

those procedures will accomplish) to complete the work on
accounts receivable related to the confirmation process. In
other words, identify the specific alternative audit procedures
that should be performed.
 Management
Outstanding Comments on Account
Name Amount Balance
Regular sales, but extended
credit terms were given on
Yael Specialty
P200,000 of goods Yael has
MFg. 432,000
responded that it does not
respond to confirmations
 Outstanding Management Comments
Name Amount on Account Balance
No response to either confirmation request.
Management indicates the sale was a special
term sale, and the goods are being held for
the convenience of this company. The
Hello company is located in Makati, and recently
300000 had a fire in its main production plant but
Combonitics
expects to resume production early next
month. the goods will be shipped as soon as
production begins, but the sale has legally
been completed.
 Management
Outstanding Comments on Account
Name Amount Balance
Account balance represents
sales of specialty products
made in late December. The
Bea Dam president of Von-Sanchez
Electronics 275000 has orally confirmed the
receivable because Bea
Dam Electronics is 50%
owned by him.
 Management
Outstanding Comments on Account
Name Amount Balance
Regular sales, but company has
renegotiated its account balance
because of defective merchandise.
Management has indicated it has
issued a credit to the company, but
Colleen Hi-Fi 200000 because management had
inspected the goods on the
customer's property, it did not
require the return of the
merchandise. It expects the
company to pay the P200,000.
 Management
Outstanding Comments on Account
Name Amount Balance
Regular sales. This is a new
Ben
175000 company. Most of the sales
Specialties (100,000) were made in December.
 Management
Outstanding Comments on Account
Name Amount Balance
Regular sales. Customer is
Cely
100000 negotiating a potential return of
Electronics defective items.
 Management
Outstanding Comments on Account
Name Amount Balance
Will is a large company. Prior
Will Pipeline 100000 experience indicates that it does not
respond to confirmations.
 Management
Outstanding Comments on Account
Name Amount Balance
Leng Tom Customer is new this year and is
54110 located in BGC, Makati
Towers
• Inspect supporting documents regarding the transaction ( Sales Invoice,
Purchase Order, Delivery Note, Journal Voucher, Credit Memo, Sales return
form)
• Check if the sales invoice is supported by a PO
• Check the amounts in the documents is same in the amounts posted in the
books.

• Ask the client regarding accounts that have extended credit terms and if
there is a criteria and proper authorization for the extension.
• Check if there is a legal agreement between the parties regarding the
holding of the customers goods. Ask the client if the goods of the client is
properly separated in its inventory. (Hello Combonitics)
• Check the terms of the related party transaction. Check all terms to be
properly disclosed in the FS (Bea Dam)
• Ask the client about the credit given without returning the goods and if this
is often done by the company (Colleen Hi-Fi)