Please answer the following question:

Question 2 (25 marks) Confirmations: Audit of accounts receivable

You are on the team auditing Zero Clearance Company, a manufacturer of garage doors. You have been assigned to the accounts receivable segment of the audit specifically confirmation of aged accounts receivable.

In your preliminary testing, you reviewed the trial balance, the subsidiary accounts receivable accounts, and the schedule of aged accounts receivable. You have selected the accounts you would like to send confirmation requests.

The Financial manager has requested to review your confirmation list before they are sent out to determine if they should be sent out. Upon this review, the Financial Managers informs you she does not want you to confirm eight of the accounts receivable on your list. Two have credit balances, three have a small balance, two have a zero balance and the remaining is material. The rationale she gives is that she feels the confirmations will upset these customers because they are kind of hard to get along with. She does not want the credit balances confirmed because it may encourage the customers to ask for a refund.

Additionally, the Finance Manager has given you a list of 15 additional confirmations to send to customers.

REQUIRED:

1. (10 marks) Is it acceptable for the Finance Manager to review the list of accounts you intend to confirm? Should you use a positive or negative confirmation? Discuss both.
2. (10 marks) If the auditor complies with the managers request to eliminate eight of the accounts from the confirmations, what additional audit work is required?
3. (5 marks) Assuming the auditor complies with all of the managers requests, what is the effect on the auditors opinion?

Thank you