You have been engaged to examine the financial statements of the Elliott Company for the year ended December 31, 19X1. You performed a similar examination as of December 31, 19X7. The trial balance of the company as of December 31, 19X1 shows: interest receivable- \(\$ 47,450,6.5\) percent secured notes receivable- \(\$ 730,000\), land \(-\$ 185,000\), and interest revenue- \(\$ 47,450\).

Your analysis reveals the following data concerning these accounts: The 6.5 percent note receivable is due from Tysinger Corporation and is secured by a first mortgage on land sold to Tysinger by Elliott on December \(31,19 \times 1\). The note was to have been paid in twenty equal quarterly payments beginning March 31, 19X2, plus interest. Tysinger, however, is in very poor financial condition and has not made any principal or interest payments to date.

Required:

For the note receivable account, discuss (1) the type of evidential matter you should obtain, and (2) the audit procedures you should perform.