You are the auditor in charge of the audit of Lee Manufacturing Company. Since the company has a large and very material trade receivable balance, you decide to use trade receivable confirmation requests to gather evidence about the validity of the balances. Discussion a. Describe the two forms of trade receivable confirmation requests and indicate what factors you would consider in determining when to use each. b. Assume that you receive a satisfactory response to your confirmation requests. How would you evaluate the adequacy of the impairment losses on doubtful debts? c. What auditing steps would you perform if there were no response to the first or second request for a positive confirmation?

You are the auditor in charge of the audit of Lee Manufacturing Company. Since the company has a large and very material trade receivable balance, you decide to use trade receivable confirmation requests to gather evidence about the validity of the balances. Discussion a. Describe the two forms of trade receivable confirmation requests and indicate what factors you would consider in determining when to use each. b. Assume that you receive a satisfactory response to your confirmation requests. How would you evaluate the adequacy of the impairment losses on doubtful debts? c. What auditing steps would you perform if there were no response to the first or second request for a positive confirmation?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and applied at the planning stage of audit after determining audit objectives, scope, approach, and risk assessment.

Question

You are the auditor in charge of the audit of Lee Manufacturing Company. Since the company has
a large and very material trade receivable balance, you decide to use trade receivable
confirmation requests to gather evidence about the validity of the balances. Discussion a.
Describe the two forms of trade receivable confirmation requests and indicate what factors you
would consider in determining when to use each. b. Assume that you receive a satisfactory
response to your confirmation requests. How would you evaluate the adequacy of the impairment
losses on doubtful debts? c. What auditing steps would you perform if there were no response to
the first or second request for a positive confirmation?

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