Substantive Procedures Practice Test

During a nonissuer financial statement audit of a regional manufacturer, the auditor is testing the existence and valuation assertions for accounts receivable. Year-end gross receivables increased 28% while sales increased 6%, and days sales outstanding rose from 42 to 58; management attributes this to a new distributor program started late in the year. Which factor most likely requires additional investigation by the auditor?

During a nonissuer financial statement audit of a software company, the auditor is testing the occurrence and accuracy assertions for revenue. A large year-end sale was recorded on December 31, but the customer’s acceptance clause requires formal sign-off, and sign-off occurred on January 10; management states the contract was “substantially complete” at year-end. Based on the audit evidence, which conclusion is most appropriate?