Collecting and Evaluating Audit Evidence Marlene’s Medical Supplies (MMS) is a medical supplies and equipment wholesaler that sells to clinics and hospitals. This often includes fulfilling large orders to both public and private medical facilities. MMS maintains a relatively small group of clients, opting to focus on a smaller number of larger clients. Most transactions are individually material and account for over $100,000 in revenue. Because of the large sales orders, most sales are made on credit, giving clients the opportunity to finance their purchases and make periodic payments. Elena is a senior auditor at a local audit firm. She has been placed on the audit engagement team for MMS. Her first task is to determine how to collect evidence for the evaluation of accounts receivables. She identifies existence and valuation as her primary audit objectives for the account balance. After reviewing the account shortly after year end, she decides to recalculate the receivables based on internal documents collected from the client. After doing the calculations for a few randomly selected transactions and finding no errors, she concludes that accounts receivables are free from material misstatement. 

a) What are the three decisions an auditor must make about how to collect evidence? Describe, in your own words, what each of those decisions includes. Then identify the example in the narrative that illustrates the decision that the auditor has made.

b) What is necessary for the evidence collected to be persuasive? Describe if/how each of these criteria are met.