Reference no: EM134007607
Assignment
Case: Accounts Receivable Confirmations
In January 2025, Henderson & Patel LLP, a national mid-tier Chartered Professional Accounting firm, accepted Riverside Rehabilitation Centre as a new audit client. The company has a fiscal yearend of September 30.
You are part of the team performing the 2025 year-end audit for Riverside Rehabilitation Centre, and your fieldwork must be completed in time for the audit report to be dated November 14, 2025. You have been assigned responsibility for preparing and sending the accounts receivable confirmations.
Riverside Rehabilitation Centre generates revenue by providing treatment rooms, therapy equipment, and specialized clinical staff to licensed physiotherapists and rehabilitation practitioners who run private practices within the facility. Accounts receivable from these practitioners totaled $3,112,480 as at September 30, 2025, and the balance is considered material.
Standard payment terms require invoices to be paid within 21 days. Roughly 58% of the receivable balance relates to five major practitioners, while the remaining 42% consists of many smaller balances, a significant portion of which are over 60 days past due. Any allowance for doubtful accounts is recorded directly against receivables, with the net showing, rather than that allowance appearing as a separate line item.
Required: Confirmation Evidence
A. Discuss the strengths and weaknesses of accounts receivable confirmations as audit evidence for Riverside Rehabilitation Centre.
B. Identify the primary financial statement assertion tested through accounts receivable confirmations.
C. Identify one additional assertion that confirmations help to test. Get the instant assignment help.
D. Explain why confirmations alone do not provide sufficient audit evidence for the accuracy, valuation, and allocation assertion.
E. Compare positive and negative confirmations. Why are positive confirmations generally the better choice for this engagement?
F. You are preparing the audit approach for accounts receivable. Explain to whom confirmations should be sent and describe how you would select the customers to confirm.
Required: Adequacy of Documentation and Audit Evidence
A. Is it possible for Henderson & Patel to use only accounts receivable confirmations as audit evidence? Why? What other procedures should be completed?
B. CAS 230 Audit Documentation requires that the auditor prepares documentation of the audit on a timely basis that provides a sufficient appropriate record of the basis for the auditor's report and evidence that the audit was planned and performed in accordance with CASs and applicable legal and regulatory requirements. List the information that should be included in the documentation for the work performed with respect to the accounts receivable confirmations.