The Salah Company sells electronics equipment and has grown rapidly in the last year by adding new customers. The audit partner has asked you to evaluate the allowance for doubtful accounts at December 31, 2019. Comparative information on sales and accounts receivable is included next: 

Required:

a. Identify what tests of controls and substantive tests of transactions you recommend be performed before conducting your analysis of the allowance for doubtful accounts. 

b. Perform substantive analytical procedures to evaluate whether the allowance is fairly stated at December 31, 2019. Assume performance materiality for the allowance account is $15,000.

Transcribed Image Text:

Year Ended Year Ended 12/31/19 12/3 1/18 Sales $12,169,876 $10,452,513 Accounts Receivable 1,440,381 1,030,933 Allowance for doubtful accounts 90,000 75,000 Bad debt charge-offs 114,849 103,471