Suppose that in an audit of accounts receivable the auditors find an unusually high number of accounts being written off as uncollectible. They determine that the cause is management’s lack of awareness of the aging patterns of various accounts. Because of this lack of information, management has not taken steps to collect older accounts.

Consequently, the accounts are written off after a certain period of time. The auditors recommend a monthly aging of accounts for management’s study. They further recommend a policy specifying steps to be taken for the collection of accounts that become delinquent.

The auditors perform a follow-up review six months after the close of the audit.

Required:

a. Develop very narrow review procedures for the aging of the accounts.

b. Develop broader follow-up review procedures to include both the aging of the accounts and the effect of the aging procedure upon credit collections.

c. Develop a set of less in-depth follow-up procedures so that the auditors may determine whether an effective collection policy has been established. Focus the review upon the policy statement itself.

d. Develop a set of more in-depth follow-up review procedures to verify the establishment of the new collection policies and to determine the effect of those policies.