9-36. Professional Skepticism Fraud LO 8 You have sent confirmations to 40 customers of Berg-Shovick Express, a long-time audit client experiencing some financial difficulty. The company sells specialized high-technology goods. You have received confirmations from 32 of the 40 positive confirmations sent. A few minor errors were noted on these accounts, but the projected amount of errors on the confirmations returned is just below tolerable error. The following information is available to you:

Book value of receivables	$7,782,292
Book value of items selected for confirmations	$3,100,110
Book value of items confirmed	$1,464,000
Audit value of items confirmed	$1,335,000

A. Identify the specific alternative audit procedures that the auditor should perform.

B. Assuming that the auditor cannot clear all items to the auditors satisfaction, identify the audit procedures that the auditor should perform to finish auditing the valuation and existence assertions for accounts receivables

\begin{tabular}{|c|c|c|} \hline Name & \begin{tabular}{l} Outstanding \\ Amount \end{tabular} & Managament Comments on Account Balance \\ \hline \begin{tabular}{l} Yunkel Specialty \\ Mfg. \end{tabular} & $432,000 & \begin{tabular}{l} Regular sales, but extended credit terms \\ were given on $200,000 of goods. Yun- \\ kel has responded that it does not respond \\ to confirmations. \end{tabular} \\ \hline \begin{tabular}{l} Hi-Tech \\ Combonitics \end{tabular} & $300,000 & \begin{tabular}{l} No response to either confirmation \\ request. Management indicates the sale \\ was a specialterm sale, and the goods \\ are being held for the convenience of this \\ company. The company is located in \\ Albuquerque, New Mexico, and recently \\ had a fire in its main production plant but \\ expects to resume production early next \\ month. The goods will be shipped as soon \\ as production begins, but the sale has \\ legally been completed. \end{tabular} \\ \hline \begin{tabular}{l} Beaver Dam \\ Electronics \end{tabular} & $275,000 & \begin{tabular}{l} Account balance represents sales of spe- \\ cialty produds made in late December. \\ The president of Berg-Shovick has orally \\ confirmed the receivable because Beaver \\ Dam Electronics is 50% owned by him. \end{tabular} \\ \hline California HiFi & $200,000 & \begin{tabular}{l} Regular sales, but company has renego \\ fiated its account balance due because of \\ defective merchandise. Management has \\ indicated it has issued a credit to the \\ company, but because management had \\ inspected the goods on the customer's \\ property, it did not require the return of \\ the merchandise. It expects the company \\ to pay the $200,000. \end{tabular} \\ \hline \begin{tabular}{l} Brenner \\ Specialties \end{tabular} & $175,000 & \begin{tabular}{l} Regular sales. This is a new company. \\ Most of the sales ($100,000) were made \\ in December. \\ (continues) \end{tabular} \\ \hline \end{tabular} \begin{tabular}{lcl} \multicolumn{1}{c}{ Name } & \begin{tabular}{c} Outstanding \\ Amount \end{tabular} & \begin{tabular}{l} Manogement Comments on Account Balance \\ Sprague \\ Electronics \end{tabular} \\ \begin{tabular}{l} Williams \\ Pipeline \end{tabular} & $100,000 & \begin{tabular}{l} Regular sales. Customer is negotiating a \\ potential return of defective items. \end{tabular} \\ Long Tom Towers & $54,110 & \begin{tabular}{l} Williams is a large company. Prior expe \\ rience indicates that it does not respond to \\ confirmations. \end{tabular} \\ \hline \end{tabular}