Can you please answer question 2a and 2b. Thank you

Part 2 Contradictory Evidence Auditors have a responsibility to remain alert to audit evidence that contradicts other audit evidence obtained. The application of professional skepticism is essential to the critical assessment and questioning of contradietory audit evidence. When the auditor obtains information during the course of the audit that contradicts information obtained from another source, the auditor has a responsibility to resolve the matter and consider its impact on the sufficiency and appropriateness of audit evidence obtained and the effect, if any, on other aspects of the audit. The auditor may face significant challenges associated with identifying, evaluating, and addressing contrary, disconfirming, or inconsistent evidence. In particular, when auditing accounting estimates, auditors may have their own biases to face, including a tendency to overweight evidence that is supportive of management's methods and assumptions, favoring evidence that confirms the aforementioned, without critically assessing the reasonableness of contradictory evidence or inputs. The following case illustrates how the auditor considers audit evidence obtained, including contradictory evidence, related to accounting estimates. Assumptions Used to Estimate the Allowance for Doubtful Accounts A commercial furniture wholesaler resenves for its allowance for doubtful accounts based on standard reserve percentages supported by historical collection experience. Management uses the same process for estimating the allowance for doubffil accounts (the "resene") as it did in the prior year: the approach is in accordance with the recently issued ASU 2016-13.' As part of its risk assessment procedures, the audit cngagement team identified the following risk of material misstatement (RMM) related to the valuation assertion: - The entity may not appropriately update its methods or assumptions used in its reserve policy (including updates to reserve percentages) for changes in circumstances. Note that the audit engagement team may have identified additional risks of material misstatement related to the valuation assertion identified as part of its risk assessment procedures; however, this example focuses on this specific risk of material misstatemeni for illustrative purposes. In addition, this risk was not identified as a fraud risk. The engagement team obtained the following evidence from the audit procedures performed to address: this risk as well as evidence from audit procedures performed in planning and risk assessment: - The current-year reserve as a percentage of gross recenables is consistent with prior years although there was an increase in revenues, grass receivables, and the related resenve. - Bad debt expense has remained consistent as a percentage of gross revenue over the past several years. - Retrospective review of receivable collections indicates that management's resenves have historically been accurate. - Economic conditions have been unstable, and the predictability of future conditions is limited. - Revemues increased substantially year over year as a result of the introduction of a new product line. The new product line is marketed toward customers in the restaurant industry, in which the entity does not currently have an established customer base. - The restaurant industry generally has a higher rate of business failure than orher customer segments. - The entity's collections experience has primarily been with customers in the retail and professional services industries; the entity has minimal collections experience with the new product line, given the recent launch. Approved sales terms have not changed year to year (e.g., sales personnel may offer an extension of credit of up to 100 percent of the purchase price consistent with prior year, criteria applied to cvaluate customer creditworthiness is consistent with prior year, payment terms are consistent with prior year). - Sales of the new product line are more frequently 100 percent financed in contrast to sales of the exisfing product lines, resulting in an increase in gross receivables. Competitors who manufacture similar restaurant furniture products have higher reserves as a percentage of their trade receivables. Part 2 Requirements: 1. Using the table below, list/summarize the corroborative (supporting management's position) and contradictory (NOT supporting management's position) audit evidence noted in the above scenario. Hint: First articulate for yourself what is management's desired position in terms of the assumption auditors are tasked to test. Doing so will help you consider corroborative vs. contradictory evidence. (NOTE: I provide one example below to help you get started.) 2. Assessment of reasonabieness of management's reserve percentages a. In your opinion, what is the likelihood (as a \%) that management's current reserves percentages are reasonable (i.e., \% from 0%100%, with 0% indicating "absolutely NOT reasonable" to 100% indicating "absolurely reasonable")? b. Using the information provided in the above scenanio, discuss key factors that most influenced your judgment regarding the likelihood that management's current reserves are reasonable from 2a above. In other words, provide support/rationale for your professional judgment. Part 2 Contradictory Evidence Auditors have a responsibility to remain alert to audit evidence that contradicts other audit evidence obtained. The application of professional skepticism is essential to the critical assessment and questioning of contradietory audit evidence. When the auditor obtains information during the course of the audit that contradicts information obtained from another source, the auditor has a responsibility to resolve the matter and consider its impact on the sufficiency and appropriateness of audit evidence obtained and the effect, if any, on other aspects of the audit. The auditor may face significant challenges associated with identifying, evaluating, and addressing contrary, disconfirming, or inconsistent evidence. In particular, when auditing accounting estimates, auditors may have their own biases to face, including a tendency to overweight evidence that is supportive of management's methods and assumptions, favoring evidence that confirms the aforementioned, without critically assessing the reasonableness of contradictory evidence or inputs. The following case illustrates how the auditor considers audit evidence obtained, including contradictory evidence, related to accounting estimates. Assumptions Used to Estimate the Allowance for Doubtful Accounts A commercial furniture wholesaler resenves for its allowance for doubtful accounts based on standard reserve percentages supported by historical collection experience. Management uses the same process for estimating the allowance for doubffil accounts (the "resene") as it did in the prior year: the approach is in accordance with the recently issued ASU 2016-13.' As part of its risk assessment procedures, the audit cngagement team identified the following risk of material misstatement (RMM) related to the valuation assertion: - The entity may not appropriately update its methods or assumptions used in its reserve policy (including updates to reserve percentages) for changes in circumstances. Note that the audit engagement team may have identified additional risks of material misstatement related to the valuation assertion identified as part of its risk assessment procedures; however, this example focuses on this specific risk of material misstatemeni for illustrative purposes. In addition, this risk was not identified as a fraud risk. The engagement team obtained the following evidence from the audit procedures performed to address: this risk as well as evidence from audit procedures performed in planning and risk assessment: - The current-year reserve as a percentage of gross recenables is consistent with prior years although there was an increase in revenues, grass receivables, and the related resenve. - Bad debt expense has remained consistent as a percentage of gross revenue over the past several years. - Retrospective review of receivable collections indicates that management's resenves have historically been accurate. - Economic conditions have been unstable, and the predictability of future conditions is limited. - Revemues increased substantially year over year as a result of the introduction of a new product line. The new product line is marketed toward customers in the restaurant industry, in which the entity does not currently have an established customer base. - The restaurant industry generally has a higher rate of business failure than orher customer segments. - The entity's collections experience has primarily been with customers in the retail and professional services industries; the entity has minimal collections experience with the new product line, given the recent launch. Approved sales terms have not changed year to year (e.g., sales personnel may offer an extension of credit of up to 100 percent of the purchase price consistent with prior year, criteria applied to cvaluate customer creditworthiness is consistent with prior year, payment terms are consistent with prior year). - Sales of the new product line are more frequently 100 percent financed in contrast to sales of the exisfing product lines, resulting in an increase in gross receivables. Competitors who manufacture similar restaurant furniture products have higher reserves as a percentage of their trade receivables. Part 2 Requirements: 1. Using the table below, list/summarize the corroborative (supporting management's position) and contradictory (NOT supporting management's position) audit evidence noted in the above scenario. Hint: First articulate for yourself what is management's desired position in terms of the assumption auditors are tasked to test. Doing so will help you consider corroborative vs. contradictory evidence. (NOTE: I provide one example below to help you get started.) 2. Assessment of reasonabieness of management's reserve percentages a. In your opinion, what is the likelihood (as a \%) that management's current reserves percentages are reasonable (i.e., \% from 0%100%, with 0% indicating "absolutely NOT reasonable" to 100% indicating "absolurely reasonable")? b. Using the information provided in the above scenanio, discuss key factors that most influenced your judgment regarding the likelihood that management's current reserves are reasonable from 2a above. In other words, provide support/rationale for your professional judgment