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In-Line Company Records Accounts Receivable from Customers Arising from Both

question 6

Essay

In-Line Company records accounts receivable from customers arising from both the sale of in-line skates and the provision of repair service.The CA firm of King & King is auditing the financial statements of In-Line Company.Lyon,the audit manager,is aware that the confirmation of customer accounts receivable is a substantive procedure normally used in the audit of accounts receivable.Selected balances from In-Line's financial statements are as follows: accounts receivable,$7,000;current assets,$322,000;total assets,$630,000;shareholders' equity,$570,000;net income,$190,000.
Required:
A)How can Lyon justify deciding not to confirm In-Line's accounts receivable?
B)Briefly describe two types of positive confirmation Lyon could send to In-Line's customers.
C)What alternative procedures can Lyon perform if In-Line's customers fail to respond to the confirmation requests?

Definitions:

Constitutional grounds

The basis or foundation in a country's constitution that supports or legitimizes laws, actions, or legal decisions.

Executive action

A policy directive or official action taken by the president or executive branch of the government without the need for legislative approval.

EEOC guideline

Official directions or instructions issued by the Equal Employment Opportunity Commission to help employers comply with anti-discrimination laws.

English-only workplace rules

Policies that mandate the exclusive use of English in the workplace, often controversial and subject to legal scrutiny.