7 33 account name cash in bank from whom confirmed

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Unformatted text preview: ccount number, whether or not the account is subject to withdrawal by check, and the interest rate if the account is interest bearing. The amount for which Star was directly liable to the bank for loans as of the balance sheet date plus the date of the loan, the due date, the interest rate, the date to which interest is paid, and description of the liability and collateral. If internal controls over cash are weak, the auditor may wish to request that the bank include a list of authorized signatures with the confirmation. 7-33 (continued) ACCOUNT NAME FROM WHOM CONFIRMED INFORMATION TO BE CONFIRMED TRADE ACCOUNTS RECEIVABLE A representative sample of debtors at a selected confirmation date which may be either at the balance sheet or an interim date. Confirmations should also be requested for the following types of accounts: Accounts with large balances; Past-due accounts; Accounts with zero or credit balances; Accounts written off during the current period; Accounts whose collection is considered questionable; Other accounts of an unusual nature. The confirmation can be either a positive or negative form of request. The positive form requests the debtor to directly notify the auditor whether the information is correct and if not correct, which items are considered incorrect. The negative form requests a reply only if the information is incorrect. In both cases the information should include: Name and address of the debtor Account number (if applicable) The confirmation "as of" date The aged account balance or individual invoices included in such balance (with invoice date). NOTES RECEIVABLE A selected sample of notes receivable outstanding at the balance sheet date. If a note receivable was written off during the year, the balance written off should be confirmed. Public warehouses or other outside custodians (if any). INVENTORIES Name and address of the debtor. Date of the note. Due date. Unpaid balance at balance sheet date. Payment arrangements. Interest rate. Date of last interest payment. Collateral, if any, to secure the note. Name and address of public warehouse or other outside custodian. The inventory date. Detailed lists of inventory stored. Under auditing standards, direct confirmation is acceptable provided supplemental inquiries are made that the inventory is the property of the company, unless the amount is a significant percent of current or total assets. 7-16 7-33 (continued) ACCOUNT NAME TRADE ACCOUNTS PAYABLE FROM WHOM CONFIRMED INFORMATION TO BE CONFIRMED Suppliers from whom substantial purchases have been made during the year, regardless of the balances of their accounts at the balance sheet date. Name and address of the supplier. The amount due and the amount of any purchase commitments as of the balance sheet date. When internal controls are considered effective, the confirmation can be at an interim date; however, a thorough review must then be made of changes in the major accounts during the intervening period between the confirmation date and year-end. It should also be noted that with interim confirmation, the auditor loses a desirable audit procedure for disclosing unrecorded and contingent liabilities at the balance sheet date. As an alternative to confirmation letters, it is a common practice to ask the vendor to send, directly to the independent auditor, a statement of the vendor’s account with the client as of the balance sheet date rather than send an accounts payable confirmation. MORTGAGES PAYABLE Mortgagee for each mortgage that has a balance at the balance sheet date. CAPITAL STOCK If Star uses an outside transfer agent and registrar, confirmations should be sent to both. 7-17 Name and address of mortgagee. Original amount. Date of note. Maturity date. Balance due at balance sheet date. Payment arrangements. Interest rate. Interest payment dates. Date of last interest payment. Nature of defaults and if any events of default are known to mortgagee. Location of mortgaged property. Name and address of transfer agent and registrar. Number of shares of common stock authorized, issued, outstanding, and held as treasury shares for the company as of the balance sheet date. 7-33 (continued) ACCOUNT NAME FROM WHOM CONFIRMED INFORMATION TO BE CONFIRMED LEGAL FEES All of Star's major attorneys. Letters should also be sent to attorneys that the independent auditor knows the client has used extensively in prior years. The auditor should request a letter from each attorney as to litigation being handled as of and subsequent to the balance sheet date. For each case, the attorney should give a description, report on its status as of the balance sheet date and as of the date of the letter, and give his or her opinion as to the ultimate liability. The attorney should also state Star's indebtedness to him or her as of the balance sheet date. SALES AND EXPENSE ACCOUNTS Occasionally, confirmation may be requested from an outside party for individual transactions contributing to total expenses or sales. This may be true where a major item is based on a formal contract and the auditor wants independent confirmation of agreement on the significant term of the contract...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.

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