Denice Williams, CPA is the in-charge auditor for Midwest Health Solutions, Inc. She requested an aging analysis of accounts receivable as of 12/31/11, the company€™s year-end. Below is the information she received:

The controller for Midwest said that the percentage have been used throughout his tenure with the organization (approximately 10 years). He also indicates that the current balance in the allowance for uncollectible accounts is $190,000, which is adequate in light of successful collection efforts for the 61-90 day and the over-90-day categories.

Required:
1. Explain why is it important for the auditor to address the adequacy of the allowance for uncollectible accounts.
2. What procedures should Denice apply to determine whether this allowance is adequate?
3. Show an example of an analysis estimate that she might prepare and discuss how you would use this to convince the controller that an adjustment isnecessary.

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Categories Current 1-30 days past d 31-60 days past due 61-90 days past due Over 90 days past due Amount Estimated Uncollectible $3,000,000 2,000,000 1,000,000 500,000 1,750,000 1% 290 5% 10% 25% ue