Foot and cross foot the Accounts Receivable aging, Confirmations provide evidence of existence as well as rights

Foot and cross foot the Accounts Receivable aging,

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Confirmations provide evidence of existence as well as rights and obligations of accounts and notes receivable. However, they do not provide strong evidence on the valuation of accounts receivable. Remember that just because a customer owes an amount does not mean they will pay that amount. Customers in bankruptcy routinely confirm amounts owed, although the receivable's value may be only a small fraction of that amount. The accounts to be confirmed are often documented with an aged trial balance. (An aged trial balance annotated to show the auditors' work is shown in Exhibit 7.10.) Accounts for confirmation can be selected at random or in accordance with another sampling method consistent with the audit objectives. Statistical methods may be useful for determining the sample size. Audit software such as IDEA is often used to access receivables files, select, and even print the confirmations. Confirmations provide evidence of existence as well as rights and obligations of accounts and notes receivable. However, they do not provide strong evidence on the valuation of accounts receivable. Remember that just because a customer owes an amount does not mean they will pay that amount. Customers in bankruptcy routinely confirm amounts owed, although the receivable's value may be only a small fraction of that amount. The accounts to be confirmed are often documented with an aged trial balance. (An aged trial balance annotated to show the auditors' work is shown in Exhibit 7.10.) Accounts for confirmation can be selected at random or in accordance with another sampling method consistent with the audit objectives. Statistical methods may be useful for determining the sample size. Audit software such as IDEA is often used to access receivables files, select, and even print the confirmations.