Confirmation of Trade Accounts Receivable. L. King, CPA, is auditing the financial statements of Cycle Company, a client that has receivables from customers arising from the saleof goods in the normal course of business. King is aware that the confirmation of accountsreceivable is a generally accepted auditing procedure.Required:a. Under what circumstances could King justify omitting the confirmation of Cycle’saccounts receivable?b. In designing confirmation requests, what factors are likely to affect King’s assessment ofthe reliability of confirmations that King sends?c. What alternative procedures could King consider performing when replies to positiveconfirmation requests are not received?

Question

Confirmation of Trade Accounts Receivable. L. King, CPA, is auditing the financial statements of Cycle Company, a client that has receivables from customers arising from the sale
of goods in the normal course of business. King is aware that the confirmation of accounts
receivable is a generally accepted auditing procedure.
Required:
a. Under what circumstances could King justify omitting the confirmation of Cycle’s
accounts receivable?
b. In designing confirmation requests, what factors are likely to affect King’s assessment of
the reliability of confirmations that King sends?
c. What alternative procedures could King consider performing when replies to positive
confirmation requests are not received?

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Accounting theory

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: What is outstanding bond?

A: Bond: It can be defined as the loan given to a business or any other organization by the investor an...

Q: Help asap

A: Under Last in First out method, it is assumed that the most recently purchased goods are sold first ...

Q: During February, $76,890 was paid to creditors on account, and purchases on account were $98,420. As...

A: The term creditors on account referred to the accounts payable of the company.  Payment to creditors...

Q: Discount Pizza retires its 7% bonds for $68,000 before their scheduled maturity. At the time, the bo...

A: Given information is: Discount Pizza retires its 7% bonds for $68,000 before their scheduled maturit...

Q: Revision of Depreciation Equipment with a cost of $180,000 has an estimated residual value of $14,40...

A: We have the following information: Cost of equipment = $180,000 Estimated Residual Value = $14,400 ...

Q: Problem 2-9 (Algo) Accounting cycle; unadjusted trial balance through closing [LO2-4, 2-6, 2-8] The...

A: DEBIT or CREDIT BALANCE: Assets & Expenses – Debit increases whereas credit decreases their bala...

Q: Suppose Hoosiers, a specialty clothing store, rents space at a local mall for one year, paying $25,2...

A: Given information is: Hoosiers, a specialty clothing store, rents space at a local mall for one year...

Q: The problem gives me total costs for materials and labor. Can you tell me the cost per materials and...

A: Since the student has specifically asked for cost of material and labour per unit to be calculated, ...

Q: Josselle Corporation retires its bonds at 106 on January 1, after the payment of interest.The face v...

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from ...