Briefly describe how to maintain appropriate control over receivables correspondence

The auditor should directly control the sending and sending of the confirmation letter, and after selecting the object and method of the confirmation, the auditor shall fill in the relevant letter content by himself. The confirmation letter is generally issued in the name of the audited unit, but it must be indicated that the reply letter should be returned to the accounting firm, and the address should be indicated to ensure that the reply can be sent back to the auditors, and the letter must not be sent back to the audited unit, so as to avoid the relevant personnel of the audited unit taking the opportunity to change the figures or intercept.

Auditors should directly control the mailing and processing of confirmation letters, and should analyze the returned letters. If there is no reply by means of affirmative confirmation, the inquiry can be re-inquired, and the auditor will issue a second or even third confirmation letter. This is done because a no-reply letter may mean a false receivable that needs to be pursued further, or because alternative procedures for correspondence are often costly or time-consuming.

If there is still no reply, the only alternative procedure should be considered, and the authenticity and recoverability of the claim should be judged based on the results of the examination. Alternative procedures include checking sales-related vouchers, such as sales orders, sales invoices, finger family outbound orders, etc.; Or check the receipt voucher after the balance sheet date, and the receipt after the balance sheet date indirectly proves that the accounts receivable at the balance sheet date do exist.

Answer]: C Answer] C

Analysis] Option c is inappropriate. If the CPA learns that the internal control of the audited entity is weak, it means that the control risk is high, the risk of material misstatement of accounts receivable (including the risk of fraud) is high, and the time for the implementation of the correspondence procedure (which is quite clear on the detail test) should be at or after the end of the financial statement period.

Affirmative and negative confirmations.

An affirmative letter is a confirmation letter to the debtor.

Require them to confirm whether the arrears they have confirmed are correct, and ask for a reply regardless of whether they are right or wrong.

A negative letter is a confirmation letter issued to the debtor. However, it is not necessary to reply when the amount of the letter is consistent, and only when the money in the letter does not match, the debtor is required to reply.

These two methods have their own advantages and disadvantages when conducting accounts receivable confirmation, the former obtains more reliable audit evidence, but the audit cost is higher; The latter is less reliable than the former due to the existence of non-collapsing knowable factors, but the cost is relatively low. It is worth noting here that for important accounts receivable, the audit cost should not be used as a reduction audit procedure.

Reason. The specific method to use should be chosen according to different circumstances: when the amount owed by individual accounts is large, or there is reason to believe that there may be disputes, errors and other problems in arrears, affirmative confirmation should be used.

A negative letter may be used when all of the following conditions are met: relevant internal controls.

is effective; Expect a low error rate; The number of debtors with small balances is high; There is reason to be confident that most of the respondents take the confirmation seriously and provide feedback on inaccuracies. It should be noted here that the choice of the above-mentioned correspondence method is not absolute, and sometimes it may be more appropriate to use the two methods in combination to complement their advantages and disadvantages, for example, according to the principle of materiality, for the imitation of large balance accounts, for the use of positive correspondence, for small balance accounts, the use of negative correspondence.

Answer: Talking about the wrong situation (if the positive letter is used for the accounts receivable, the certified public accountant can reduce the amount of accounts receivable letter accordingly and narrow the scope of the letter).

The scope and object of the confirmation. Unless there is sufficient evidence that the accounts receivable are not material to the financial statements of the audited entity, or that the correspondence is likely to be invalid, the certified public accountant shall correspond to the accounts receivable. If the CPA does not corroborate the accounts receivable, the CPA should state the reasons in the working paper.

If it is considered that the correspondence is likely to be invalid, the CPA should implement alternative audit procedures to obtain sufficient and appropriate audit evidence. The number and scope of the letter are determined by many factors, mainly including:

1) The importance of accounts receivable in all assets. If accounts receivable account for a large proportion of total assets. The scope of the correspondence should be correspondingly larger.

2) The strength of the internal control of the audited entity. If the internal control system is more sound, the number of letters can be reduced accordingly; Otherwise, the scope of the correspondence should be expanded accordingly.

3) The results of the correspondence from previous periods. If there are major discrepancies found in the correspondence in previous periods, or there are many disputes over arrears, the scope of the correspondence should be expanded accordingly.

4) The choice of correspondence method. If a positive confirmation method is adopted, the amount of correspondence can be reduced accordingly; If the negative method of confirmation is adopted, the amount of confirmation should be increased accordingly.

In general, CPAs should choose the following items as the object of confirmation: large or long-aged projects; projects in dispute with the debtor; Related Party Projects; Major client (including close relationship) projects; Projects with frequent transactions but small or even zero balances at the end of the period; Irregular items that may result in material misstatement or fraud.