Trade inventories and receivable account?

Question

1)If an auditor wants to confirm a balance of relating to receivable account the best way for him would be:
2)If an auditor wants to confirm a balance on the “Trade inventories” account the best way for him would be

Answer 1

1)If an auditor wants to confirm a balance of relating to receivable account the best way for him would be to obtain an external confirmation direct from the debtors.
When performing confirmation procedures, the auditor should maintain control over the process of selecting those to whom a request will be sent, the preparation and sending of confirmation requests, and the responses to those requests. Control is maintained over communications between the intended recipients and the auditor to minimize the possibility that the results of the confirmation process will be biased because of the interception and alteration of confirmation requests or responses. The auditor ensures that it is the auditor who sends out the confirmation requests, that the requests are properly addressed, and that it is requested that all replies are sent directly to the auditor. The auditor considers whether replies have come from the purported senders.

2) If an auditor wants to confirm a balance on the “Trade inventories” account the best way for him would be to obtain an external confirmation direct from the inventories custodian. I'm assuming you mean inventories held by third parties at bonded warehouses for processing or on consignment. Otherwise the auditor should attend the client's stocktaking and observe how it is conducted and make his own test counts, etc.

If you want notes on external confirmations, click on the link.

Answer 2

1) For accounts receivable, send a confirmation request for the outstanding balance with a self-addressed return envelope. The request needs to be signed by the client authorizing the customer to respond directly to the auditor.

2) Trade inventories is a factor or cost and quantity. The auditor will be able to physically verify the inventory or obtain confirmation in the manner stated above for inventory held outside the control of the client i.e. with a custodian, etc. The auditor will still need to test the cost by reviewing the invoices and other documentation.

Answer 3

1) send a letter ( with self address / with stamp return envelopes ) to companies with "receivable account" and ask them to confirm

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