Account Receivable
An account receivable is an asset account that shows the balance of money used by a firm for its goods and services but not paid by the customers. Any cash owned by the customer for the purchases they made on credit gets categorized as accounts receivable.
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- King would justify the confirmation of the cycle’s AR by identifying the receivables are immaterial. King needs to conduct the confirmation through the prior knowledge that the responses would be unreliable. The procedures involved in accounting should also support confirmation. The analytics procedures and other substantive procedures show relevant evidence for the omitting of the receivable accountable.
- Confirmation request by king nay get affected by the confirmation forms in terms of the positive and the negative confirmation. A positive confirmation gets attained when the customer confirms the accurateness and inaccurateness of the balance sheet. A negative confirmation is conducted by the firm to the customers to show the discrepancies in the firm’s records.
- When positive confirmation requests are not received, King would consider determining the cause of the misstatement, generalize the misstatement via the inhabitants, and consider if fraud has occurred in the firm.
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- The client company has a legal right to all accounts receivable at the balance sheet date.
The firm needs to get vigilant on all the agreements that may affect the account receivable. The firms conduct the following procedures to determine whether the client entity has the legal rights by considering whether the AR factored or pledged out the loan agreements.
- Observe the old trial balance for maximum significant outstanding accounts.
- Observe accounts-receivable in the trial balance for the strength unpaid from employees and officers
- Display customary association between regular accounts allocated stabilities and regular accounts receivable.