John Gossling, a public accountant, is examining the financial statements of a manufacturing company with a sig¬ nificant amount of trade accounts receivable. Gossling is sat¬ isfied that the accounts are properly summarized and classified and that allocations, reclassifications, and valua¬ tions are made in accordance with generally accepted accounting principles. He is planning to use accounts receiv¬ able confirmation requests to satisfy the third examination standard as to trade accounts receivable.

Required

a. Identify and describe the two forms of accounts receiv¬ able confirmation requests, and indicate the factors Gossling will consider in determining when to use each.

b. Assume that Gossling has received a satisfactory response to the confirmation requests. Describe how he could evaluate collectibility of the trade accounts receiv¬ able.

c. What are the implications to a public accountant if, dur¬ ing his or her examination of accounts receivable, some of a client's trade customers do not respond to the request for positive confirmation of their accounts?

d. What auditing steps should a public accountant perform if there is no response to a second request for a positive confirmation?

(AICPA adapted)