Reference no: EM132619114

Dodge, CPA, is auditing the financial statements of a manufacturing company with a significant amount of trade accounts receivable. Dodge is satisfied that the accounts are correctly summarized and classified and that allocations, reclassifications, and valuations are made in accordance with GAAP. Dodge is planning to use accounts receivable confirmation requests to obtain sufficient appropriate evidence as to trade accounts receivable.

Required

Problem 1: Identify and describe the two primary forms of accounts receivable confirmation requests and indicate what factors Dodge will consider in determining when to use each.

Problem 2: Assume that Dodge has received a satisfactory response to the confirmation requests. Describe how Dodge can evaluate collectibility of the trade accounts receivable.

Problem 3: What are the implications to a CPA if, during an audit of accounts receivable, some of a client's trade customers do not respond to a request for positive confirmation of their accounts?

Problem 4: What auditing steps should a CPA perform if there is no response to a second request for a positive confirmation?