Teklas is an automobile parts manufacturer based in Turkey. In recent years, Teklas has successfully expanded its business and now exports to auto manufacturers around the world. As part of the expansion, Teklas has accepted new clients from different regions including across Europe, Africa, and Asia. Also as part of the expansion, an increasing number of sales are financed by the company with client payment terms ranging from 30 to 90 days. It is customary for some Turkish companies to factor receivables to speed up cash collection and reduce doubtful accounts risk. In your audit of Teklas, part of your task is to assess whether accounts receivables are corrected reported in the ledger.

a. Based on the facts above, what accounts receivable balance related audit objective(s) might have a high risk of material misstatement?

b. An increase in accounts receivable is expected since sales overall are increasing. What related factors will you consider related to changes in the accounts receivable balance?

c. Does it make sense to use negative confirmation to test for the accuracy of accounts receivable balances for Teklas?

d. How might you test that Teklas has rights to the accounts receivables reported in its ledger?