Winters & Allen is a mail-order seller of party supplies and novelty items. It sells to both

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Winters & Allen is a mail-order seller of party supplies and novelty items. It sells to both businesses and individuals, but the accounting processing and controls are the same for all sales transactions. You have prepared the following analysis of the accounts receivable balance at year-end.

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Based on inquiry of the credit manager and discussions with corporate officers, you have determined that of the last category there are 15 accounts that are seriously past due and may be in dispute and 5 accounts with related parties. These 20 accounts total \($10,000.\)

Required: 

a. Describe an efficient audit approach to determining the number of and specific accounts to confirm with customers. 

b. Your CPA firm's guidance on materiality indicates that \($15,000\) would be a material misstatement of the account receivable balance. How would the \($15,000\) amount be used in your determination of the extent of the confirmation procedure? 

c. If you decided not to use audit sampling to select any customer balances for confirmation, what additional information would you need about the composition of the account balance?

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