Advanced Auditing Chapter 6: Professional Simulation You will find this assignment at the end of Chapter 6

Assume that you have just been promoted to the position of in-charge accountant on the audit of Lancer Corporation, which manufactures and wholesalers consumer products. Lancers customer base is represented by about 10% of the customers that represent 65% of sales and a very large number of smaller retailers that make up the other 35% of the companys sales. Last year Baker and Co. (Lancers auditors) send positive confirmations to a sample of Lancers customers. All of Lancers larger customers responded to the positive confirmations, but many of the smaller customers did not.

As in-charge on the Lancer audit, you have discussed the low response rate from the smaller customers with the audit manager, Dustin Barker. You have suggested sending negative confirmations to the smaller customers. The Dustin wants you to research the guidance provided by the U.S. Auditing Standards about using negative confirmation. Specifically, cut and paste the standard section that explains the significance of the evidence provided by unreturned negative confirmations.

Dustin would also like you to research the U.S. auditing standards about the factors that influence the reliability of confirmation. Draft a memo (no title page) that summarizes the factors that influence the reliability of confirmations as evidence about the existence and occurrence of receivables and sales.

To: Dustin Barker, Manager

Re: Factors that influence the reliability of confirmations From: CPA Candidate