Dodge, CPA, is auditing the financial statements of amanufacturing company with a significant amount of trade accounts receivable. Dodgeis satisfied that the accounts are correctly summarized and classified and that allocations,reclassifications, and valuations are made in accordance with GAAP. Dodge is planningto use accounts receivable confirmation requests to obtain sufficient appropriate evidenceas to trade accounts receivable.a. Identify and describe the two forms of accounts receivable confirmation requestsand indicate what factors Dodge will consider in determining when to use each.b. Assume that Dodge has received a satisfactory response to the confirmation requests.Describe how Dodge can evaluate collectibility of the trade accounts receivable.c. What are the implications to a CPA if during an audit of accounts receivable someof a client’s trade customers do not respond to a request for positive confirmation oftheir accounts?d. What auditing steps should a CPA perform if there is no response to a second requestfor a positive confirmation?*
Dodge, CPA, is auditing the financial statements of a
manufacturing company with a significant amount of trade
is satisfied that the accounts are correctly summarized and classified and that allocations,
reclassifications, and valuations are made in accordance with GAAP. Dodge is planning
to use accounts receivable confirmation requests to obtain sufficient appropriate evidence
as to trade accounts receivable.
a. Identify and describe the two forms of accounts receivable confirmation requests
and indicate what factors Dodge will consider in determining when to use each.
b. Assume that Dodge has received a satisfactory response to the confirmation requests.
Describe how Dodge can evaluate collectibility of the trade accounts receivable.
c. What are the implications to a CPA if during an audit of accounts receivable some
of a client’s trade customers do not respond to a request for positive confirmation of
their accounts?
d. What auditing steps should a CPA perform if there is no response to a second request
for a positive confirmation?*
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