Requirements for Confirming Accounts Receivable Confirmation of Accounts Receivable Is

question 26

Essay

Requirements for confirming accounts receivable Confirmation of accounts receivable is required by auditing standards unless certain conditions exist.Identify the conditions that will be present in an audit that does not confirm accounts receivable.

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Definitions:

Sales Forecast

An estimation of the sales a company expects to achieve over a certain period in the future.

Additional Funds Needed (AFN)

Those funds required from external sources to increase the firm’s assets to support a sales increase. A sales increase will normally require an increase in assets. However, some of this increase is usually offset by a spontaneous increase in liabilities as well as by earnings retained in the firm. Those funds that are required but not generated internally must be obtained from external sources.

Pro Forma Financial Statements

Financial documents that project a company's future financial performance based on certain assumptions.

Capital Intensity Ratios

Ratios that measure the extent to which a company is deploying its assets in its business operations.