Sylvie Beaubien is the engagement manager for the audit of Terra Enterprises. Sylvie is currently planning tests

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Sylvie Beaubien is the engagement manager for the audit of Terra Enterprises. Sylvie is currently planning tests of details of balances for accounts receivable and is considering the use of electronic confirmation requests to improve response rates. The historical response rate to written confirmation requests sent to Terra’s customers has been below 50 percent and Sylvie believes they can increase that to over 80 percent using electronic requests. Sylvie is considering two different options. The first option is to use email confirmation requests, with requests emailed directly to customers and the customers emailing responses directly to the audit firm. The second option is to use direct access to customers’ electronic records through website links for Terra’s largest customers, and then written requests to the remaining customers.


REQUIRED

a. What factors does Sylvie need to consider in deciding whether to use written confirmation requests, email requests, or direct access to electronic records?

b. How will the audit firm ensure the reliability of the responses? For example, how might they verify the email addresses or the reliability of the electronic records?

Who should provide the email addresses for the email confirmations, or the website links for direct access to electronic records?

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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Related Book For  book-img-for-question

Auditing The Art and Science of Assurance Engagements

ISBN: 978-0134613116

14th Canadian edition

Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones

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