Albert Enterprises (Albert) is a large importer of goods from China. Albert deals with thousands of suppliers
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Albert has faced increasingly stiff competition over the last two years. Some of the Chinese suppliers are negotiating better deals with Albert's competitors, and retailers are also starting to use more than one importer. In an effort to retain business, Albert's management has decided to relax credit terms for retailers. Six months ago, the terms of payment were renegotiated with all larger retailers and some smaller retailers from 7 days to 30 days. In addition, security deposits are no longer required from smaller retailers, although credit checks are still performed.
Required
(a) Explain the potential impact of the change in credit terms on the accounts and the associated audit risk.
(b) What changes to the audit program for accounts receivable would you recommend this year, given the change in credit terms?
(c) How would you select a sample of Albert's accounts receivable customers for accounts receivable confirmation letters?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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