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The Audit Senior has to communicate with Betty, Total Computer’s Controller, and verify with the customer about the returned items. In example 6, the confirmation mailed to the customer was not returned, thus additional audit work is necessary. The audit engagement team has to examine the cash receipts and the contract, and the Audit Manager has to communicate with Total Computer’s Sales Manager. Therefore, the assessed level of control risk for the audit of accounts receivable must have been increased since auditors need more effort in examples 5 and 6. In this case, the auditor’s decision would likely be to assess control risk at maximum for assertions related to controls over accounts receivable...
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