Audit and Assurance Practice Exam 2025 – Complete Prep Resource

The recommended action of examining subsequent collections of accounts is appropriate because it helps the auditor assess whether the receivables were valid at the time of the audit. By looking at the actual cash collections that occurred after the reporting date, the auditor can gather evidence to corroborate whether the receivables on the balance sheet were collectible. This action serves to mitigate the risk associated with the previous oversight of not confirming receivables directly, thus allowing the auditor to form a more reliable conclusion about the sufficiency of the audit evidence gathered.

Moreover, this approach aligns with auditing standards that emphasize the importance of obtaining sufficient appropriate evidence to support the assertions made in the financial statements. By examining subsequent collections, the auditor can strengthen their understanding of the receivables' collectability, thereby ensuring the integrity of the audit despite prior mistakes. This approach also enables the auditor to provide management and stakeholders with a more accurate assessment of the financial position reflected in the financial statements.