Your firm is the external auditor of Southwood Trading Ltd. and you are auditing the fi nancial
Question:
Your firm is the external auditor of Southwood Trading Ltd. and you are auditing the fi nancial statements for the year ended June 30, 2020. Southwood Trading has sales of $25 million and the accounts receivable at June 30, 2020, were $5.2 million.
The engagement partner has asked you to consider the relative reliability of evidence from third parties and certain matters relating to an accounts receivable confirmation.
Required
a. Consider the relative reliability of third-party evidence in the form of accounts receivable confirmations for trade receivable balances.
b. Describe the audit work you would carry out in following up the responses to the accounts receivable confirmations where:
i. The customer disputes the balance and provides a different balance
ii. No reply to the confirmation has been received from the customer, and all attempts at obtaining a reply have failed
Accounts ReceivableAccounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Step by Step Answer:
a i Accounts receivable confirmations Customers are independent third parties and providing there are suitable controls over the preparation and mailing of the confirmation requests and the replies ar...View the full answer
Auditing A Practical Approach
ISBN: 978-1119566007
3rd Canadian edition
Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren
